What is Stress Testing?
Scenario analysis that models portfolio losses under severe market shocks.

+240 bps shock · capital −18%
Stress testing asks…
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In real work
Stress testing shows a 240 bps rate shock wipes 18% of CET1. Brief the ALCO.
In the illustration
The +240 bps shock plate is set and the press comes down; the capital column compresses and the gauge falls 18%.
Run stress testing in your finance platform on the portfolio: rates up 200 basis points, equities down 25 percent, and the losses by desk.
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