—Stress testing is a risk management tool used to
simulate extreme but plausible events and measure how the
events would impact firm’s income. Stress testing aims to
identify extreme events that could trigger catastrophic losses in
a given portfolio. Here, exceptional refers to events of high
severity and plausible excludes improbable scenarios. Stress
tests also provide actionable information to senior management
for decisions around capital allocation and contingency
planning. This paper revealed that the Turkish banking system
was robust to a number of adverse shocks.
—Value-at-risk models, stress testing, market
risk, scenario analysis, turkish banking sector.
I. Yıldırım is with the vocational school, Hitit University, Çorum, Turkey
(e-mail: firstname.lastname@example.org ).
Cite:Ismail Yıldırım, "Stress Testing in Risk Management: An Application in the Turkish Banking Sector," International Journal of Trade, Economics and Finance vol.3, no.6, pp. 441-444, 2012.