Stress testing

Simulating extreme but plausible scenarios, such as a market crash or a sharp rise in interest rates, to see how a portfolio or company would hold up. It complements statistical measures that rely on normal market conditions.

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Related terms

Risk measures

• Active tail hedging
• Conditional value at risk
• Customer acquisition cost
• Fat tails
• Long-tail risk
• Regulatory compliance
• Risk management
• Skewness
• Tail-risk diversifiers
• Value at risk