Stress test: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Update last sentence.)
imported>Doug Williamson
(Add link.)
Line 14: Line 14:
== See also ==
== See also ==
* [[Back test]]
* [[Back test]]
* [[Biennial exploratory scenario]]
* [[Black swan]]
* [[Black swan]]
* [[Heuristic]]
* [[Heuristic]]

Revision as of 15:48, 9 September 2020

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.


See also