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Stress Testing

Stress testing is a simulation technique used to determine how asset and liability portfolios or companies would react to different financial situations. It is a useful method to gauge how portfolios would fare during a financial crisis. Stress tests focus on key risks like credit, market, and liquidity risks to evaluate banks' financial health in crisis situations. The results depend on the assumptions made in various economic scenarios, such as changing interest rates, lending requirements, or unemployment.

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Hansaraj Parida
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549 views3 pages

Stress Testing

Stress testing is a simulation technique used to determine how asset and liability portfolios or companies would react to different financial situations. It is a useful method to gauge how portfolios would fare during a financial crisis. Stress tests focus on key risks like credit, market, and liquidity risks to evaluate banks' financial health in crisis situations. The results depend on the assumptions made in various economic scenarios, such as changing interest rates, lending requirements, or unemployment.

Uploaded by

Hansaraj Parida
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

Stress Testing

By Group No. 3 4111015015 Avinash Tripathi 4111017017 Deeksha Gupta 4111019019 Gursharan Singh 4111020020 Hansaraj Parida

What is Stress Test?


It is a simulation technique used on asset and liability portfolios to determine their reactions to different financial situations. Stress tests are also used to gauge how certain stressors will affect a company or industry. A useful method for determining how a portfolio will fare during a period of financial crisis. The Monte Carlo simulation is one of the most widely used methods of stress testing. Stress tests focus on a few key risks such as credit risk, market risk, and liquidity risk to banks financial health in crisis situations. The results of stress tests depend on the assumptions made in various economic scenarios

For example, the Treasury Department could run stress tests on banks to determine their financial condition. Banks often run these tests on themselves. Changing factors could include interest rates, lending requirements or unemployment.

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