Key words
system dynamics, insightmaker, credit risk, reverse stress testing, risk management, simulation modelling
articles
Construction of business default scenarios based on system dynamics models
One of the modern procedures, which are recommended to banks for risk assessment, is reverse
stress testing. It is a procedure of building of scenarios, which lead to a specified loss level. Knowledge
of such scenarios allows banks to mitigate the consequences of their implementation.
In the context of credit risk, reverse stress testing makes it possible to identify macroeconomic conditions
leading to a given level of credit portfolio losses. However, the current credit risk assessment
models are not suitable for solving the problems of reverse stress testing. Widely known models do
not take into account the structure of specific companies, do not allow investigating the development
of crisis scenarios in time and need a large sample of data on similar enterprises.
This article is devoted to the construction of system dynamics models of enterprises in commercial
and agricultural sectors of the Russian economy. Research demonstrates the possibility of using
system dynamics models to determine the macroeconomic scenarios, leading to the default of a company.
In system dynamics enterprises are represented by system consisting of constantly interacting
elements and external parameters. The links between system elements express in terms of functions
and differential equations, which specify the dynamics of the model. Thus, the company’s stability in
relation to different macroeconomic scenarios can be considered. The models of investigated enterprises
are implemented in the Insightmaker system.
The author:
The author:
Golembiovskiy D.
Degree:
Dr. of Technical Sciences, Professor, Moscow State University
Location:
Moscow
