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Stress testing incorporating causal dependency [14]

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Bullet points include: Conditional probability is e.g.: P(A|B) = probability of A given that B occurs (singly-conditioned) P(A|B,C) = probability of A given that B and C occur (doubly-conditioned) Rebonato (2010) defines a conditional probability as being of low order if is at most doubly-conditioned (i.e. of order >= 2) Marginal probabilities, e.g. P(A) are ‘nil’-conditioned so in this context are of even lower order (i.e. order zero)

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