Moody’s Analytics Webinar Highlights Comprehensive Approach to Stress Testing

Published on Tuesday, 03 August 2010 09:52 Written by TradersHuddle Staff

LONDON-( Business Wire )-

Moody’s Analytics, a leading provider of economic forecasting, credit analysis and enterprise risk management solutions, highlighted its comprehensive approach to stress testing in an August 2 webinar attended by over 300 participants. During the Webinar, Moody’s reviewed how its approach links underlying drivers of financial institutions’ performance with alternative scenarios based on the business cycle, such as sovereign risk and deflation.

Developed by Moody’s Analytics economic modelling arm, Moody’s stress testing approach couples performance drivers with global and local economic activity, generating realistic and flexible scenarios that can be used to assess the effects of sovereign defaults, energy crises and discrete factors, such as the nature and pace of an economic recovery.

“Persistent sovereign debt problems in Europe underscore the need to translate potential shock events and external economic conditions into a full scenario explicitly tied to business performance,” says Juan Manual Licari, Director at Moody’s Analytics. “Moody’s flexible and robust stress testing platform is already helping clients predict how their portfolios may react to shock events, including the impact of the resulting macroeconomic factors,” said Mr. Licari.

Through its comprehensive approach, Moody’s Analytics helps clients stress test regulatory capital, economic capital and liquidity capacity, which are key to satisfying regulatory requirements under Basel II and Solvency II. The solution also gives clients the ability to identify portfolio vulnerabilities, assess current model limitations and support portfolio management decisions.

Moody’s approach combines a system of simultaneous equations and Vector Autoregressive Analysis (VAR) considerations. These include the real side of the economy, such as aggregate demand and aggregate supply, as well as financial series, including interest rates, inflation, equity and credit markets. For example, Moody’s clients have used this approach to model the impact of changes in the UK’s Financial Services Authority’s macroeconomic assumptions on their risk drivers and portfolios used for Internal Capital Adequacy Assessment Process purposes under Basel II.

Moody’s Analytics solution can be used to stress test all asset classes as well as key external indicators — including government yield curves, swap rates, stock market indices, CDS spreads by sector and money market rates. It allows for fundamental stress testing of portfolios using a transparent and proven methodology that can effectively articulate results to internal and external stakeholders and constituents.

For more information visit www.economy.com/stresstesting

About Moody’s Analytics

Moody’s Analytics helps capital markets and credit risk management professionals worldwide respond to an evolving marketplace with confidence. The company offers unique tools and best practices for measuring and managing risk through expertise and experience in credit analysis, economic research and financial risk management. By providing leading-edge software, advisory services and research, including the proprietary analysis of Moody’s Investors Service, Moody’s Analytics integrates and customizes its offerings to address specific business challenges. Moody's Analytics is a subsidiary of Moody's Corporation (NYSE: MCO), which reported revenue of $1.8 billion in 2009, employs approximately 4,000 people worldwide and maintains a presence in 26 countries. Additional information about the company is available at www.moodys.com.

Moody’s AnalyticsMedia:Michael Adler, 212-553-4667Vice PresidentCorporate Communicationsmichael.adler@moodys.comorKirsten Knight, 44-20-7772-8657Assistant Vice PresidentCorporate This e-mail address is being protected from spambots. You need JavaScript enabled to view it.