Stress testing / Liquidity and funding risk [15]

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Bullet points include: Whether scenario is reasonably plausible is important, see Kemp (2011) Suppose have n-vector of risk factors r and portfolio value is A(r) and covariance matrix of r is V, say Suppose r is Guassian, then equi-probable scenarios are defined by ellipsoid: Probability that r lies inside this ellipsoid is chi-squared, n degrees of freedom

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