Stress testing

A stress test asks whether liquidity, capital, obligations or performance remain acceptable under a deliberately demanding scenario. It can combine linked changes rather than vary only one input at a time. Specify the horizon, severity, assumptions and management responses, and explain why the scenario is relevant. Stress results reveal vulnerabilities conditional on the model; they do not by themselves state how likely the scenario is or prove resilience to every possible shock. Reverse stress testing starts with an unacceptable outcome and asks what conditions could produce it.