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This presentation is based on a part of an academic course on Further Enterprise Risk Management (Further ERM) titled ‘Stress testing incorporating causal dependency’ and covers topics such as: stress testing (association versus causation), frequentist versus subjective statistical approaches, marginal, conditional and joint probabilities, Bayesian nets, governance and handling really extreme events

Slides

1	Session 3: Stress testing incorporating causal dependency
2	Stress testing
3	Session 3: Stress testing incorporating causal dependency
4	Association or causation?
5	Limits of quantitative risk analysis
6	Frequentist versus subjective probabilities
7	Frequentist versus subjective probabilities (ctd)
8	Behavioural biases
9	Cognitively more reliable approaches (1)
10	Cognitively more reliable approaches (2)
11	Such a model may also be more intrinsically helpful
12	Session 3: Stress testing incorporating causal dependency
13	Implementing causal dependencies in practice
14	Low order conditional probabilities
15	Bayes theorem
16	Linking marginal and conditional probabilities (1)
17	Linking marginal and conditional probabilities (2)
18	Joint probabilities from marginal and conditional ones
19	Conditional independence
20	Session 3: Stress testing incorporating causal dependency
21	Bayesian networks (or nets)
22	Bayesian nets: direction of causality
23	Bayesian nets: conditional probability table for node
24	Using Bayesian nets
25	Additional challenges: mathematical
26	Additional challenges: judgemental
27	Selecting and combining stress tests
28	Top down versus bottom up
29	Credibility with audience
30	Other sanity checks
31	Reverse stress testing
32	Incorporating stress tests in portfolio construction
33	Session 3: Stress testing incorporating causal dependency
34	Governance
35	Session 3: Stress testing incorporating causal dependency
36	Really extreme events
37	Really extreme events: suggestions in Kemp (2010)
38	Important Information

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