Should Bank Stress Tests Be Fair?

  title={Should Bank Stress Tests Be Fair?},
  author={Paul Glasserman and Mike Xin Li},
Regulatory stress tests have become the primary tool for setting capital requirements at the largest U.S. banks. The Federal Reserve uses confidential models to evaluate bankspecific outcomes for bank-specific portfolios in shared stress scenarios. As a matter of policy, the same models are used for all banks, despite considerable heterogeneity across institutions; individual banks have contended that some models are not suited to their businesses. Motivated by this debate, we ask, what is a… 

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