What If Greece Leaves the Euro?
categories: Americas, EMEAI, Risk Management, RMA, Asia Pacific, Asset Owners, Hedge Funds, Multi-Asset Class, RiskMetrics RiskManager, RiskMetrics RiskManager, Research Paper, ACERBI Carlo, VERBRAKEN Thomas, SIMON Zsolt, Asset Managers (Quant or Fundamental), Banks, SRIDHAR Vivek
Stress Testing the Greek Exit Scenario Using MSCI RiskManager
This Product Insight uses MSCI RiskManager to examine the potential effects of a Greek exit from the euro, explaining the detailed assumptions behind our stress test design. We make use of RiskManager's predictive stress test tool, which starts with user-defined hypothetical shocks on a few core risk factors (singled out as the drivers of the global crisis) then propagates shocks on all markets. In this current exercise, we employ historical covariance data from the 2012 European Sovereign Debt crisis, plus evidence of changing exposure to Greek debt since then. Finally, our stress test scenario is applied on selected example portfolios for illustration purposes.