Stress testing / Liquidity and funding risk [13]

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Bullet points include: Often we stress the portfolio value by considering what happens to portfolio value if e.g. interest rates, FX rates, equity prices, oil prices … move in a given way Requires a pricing engine Sometimes apply joint stresses, i.e. joint realisations of specific outcomesMay ‘stress’ VaR or other risk measures by e.g. supposing covariance matrix shifts (e.g. ‘Stressed VaR’)

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