FFA Working Papers 6:001 (2026)88

Measuring Flood Risk in Czechia with Stress Testing and a Gumbel copula‑based VaR

Marek Folprecht
Faculty of Finance and Accounting, Prague University of Economics and Business

The study presents a holistic approach to modeling flood risk of real estate properties. The method combines the hydrological flow simulation model and a model of financial losses. Two use cases of the model are discussed. First, a stress testing method, based on historical scenario simulations, is presented. Next, a Value at Risk approach using the Generalized extreme value distribution and the Gumbel copula is discussed. Both methods are then tested on a large sample of Czech house data. The results show that the model can replicate the order of historical flood magnitudes under the historical scenarios. Moreover, the Value at Risk approach can generate scenarios unseen in recent history. The model could be a useful flood losses modeling tool for banks, insurance companies, real estate investment companies or state agencies. A special case for stressing credit risk parameters for mortgage portfolios is discussed in more detail.

Keywords: Flood risk, Generalized extreme value, Gumbel copula, Value at Risk, Monte Carlo, Czech Republic, Stress Testing

Received: December 14, 2025; Revised: January 1, 2026; Accepted: January 12, 2026; Prepublished online: January 23, 2026; Published online: January 22, 2026  Show citation

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Folprecht, M. (2026). Measuring Flood Risk in Czechia with Stress Testing and a Gumbel copula‑based VaR. FFA Working Papers, 6, Article 2026.001. https://doi.org/10.XXXX/xxx.2026.001
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