Stress testing / Liquidity and funding risk [53]

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Bullet points include: Crisis set new precedents for stress situations – both severity and duration Liquidity stress scenarios usually looked at singularly: without considering consequences for other risk events, e.g. credit risk Many stress scenarios assumed that only a single (product) market was stressed, e.g. unsecured money market experiences a crisis In practice, different possible funding markets are connected Full currency convertibility cannot be assumed Often only liabilities were stressed, yet liquidity crisis may also have profound impact on asset markets, e.g. draw down risk

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