Stress test: Difference between revisions
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Stress testing is a form of scenario analysis | ''Sensitivity analysis and stress testing.'' | ||
Stress testing is a form of scenario analysis. | |||
In stress testing, worst case data are input into a financial model. | |||
The idea is to test whether creditworthiness - or any other attribute being modelled - is robust enough to survive the selected 'worst case' scenario. | The idea is to test whether creditworthiness - or any other attribute being modelled - is robust enough to survive the selected 'worst case' scenario. | ||
Stress testing necessarily involves a significant degree of judgement and subjectivity in identifying the appropriate worst case inputs with which to run the stress test. | Stress testing necessarily involves a significant degree of judgement and subjectivity in identifying the appropriate 'worst case' inputs with which to run the stress test. | ||
In the banking context, stress testing is routinely carried out on banks to identify the level of risk of their failure. | |||
== See also == | == See also == | ||
* [[Back test]] | * [[Back test]] | ||
* [[Biennial exploratory scenario]] | |||
* [[Black swan]] | |||
* [[Heuristic]] | |||
* [[Idiosyncratic stress]] | |||
* [[Liquidity stress test]] (LST) | |||
* [[Model]] | * [[Model]] | ||
* [[PRA buffer]] | |||
* [[Reverse stress test]] | * [[Reverse stress test]] | ||
* [[Scenario analysis]] | * [[Scenario analysis]] | ||
* [[Sensitivity analysis]] | * [[Sensitivity analysis]] | ||
* [[Shock]] | |||
* [[Stress]] | |||
* [[System-wide exploratory scenario]] (SWES) UK | |||
[[Category:Risk_frameworks]] | [[Category:Risk_frameworks]] | ||
Latest revision as of 21:37, 29 July 2024
Sensitivity analysis and stress testing.
Stress testing is a form of scenario analysis.
In stress testing, worst case data are input into a financial model.
The idea is to test whether creditworthiness - or any other attribute being modelled - is robust enough to survive the selected 'worst case' scenario.
Stress testing necessarily involves a significant degree of judgement and subjectivity in identifying the appropriate 'worst case' inputs with which to run the stress test.
In the banking context, stress testing is routinely carried out on banks to identify the level of risk of their failure.
