What is Stress Test?
Stress Test A simulation or analysis designed to evaluate the resilience of an institution, portfolio, or system under severe but plausible adverse conditions; mandated in financial regulation for risk management.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Stress Test” Used in Practice?
Regulators require banks to conduct regular stress tests to ensure sufficient capital buffers against market, credit, and liquidity shocks.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Stress Test?
A simulation or analysis designed to evaluate the resilience of an institution, portfolio, or system under severe but plausible adverse conditions; mandated in financial regulation for risk management.
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