An empirical study of bank stress testing for auto loans

Document Type

Article

Publication Date

12-1-2018

Abstract

We present an empirical study of stress testing for portfolios of auto loans. We find that loans aged five years or more have significantly higher default probabilities. This finding raises concerns about the increasing maturity of auto loans in recent years. A challenge in stress testing is the instability of the estimated coefficient of macroeconomic variables, which raises questions on the reliability of stress test results. For this reason, it is important for model developers to perform sensitivity analyses and make conservative adjustment to minimize model risk.

Identifier

85054664442 (Scopus)

Publication Title

Journal of Financial Stability

External Full Text Location

https://doi.org/10.1016/j.jfs.2018.09.005

ISSN

15723089

First Page

79

Last Page

89

Volume

39

Grant

18VSJ073

Fund Ref

National Office for Philosophy and Social Sciences

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