Stress testing incorporating causal dependency [32]

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Bullet points include: Portfolio construction ultimately involves risk-reward trade-off So in theory needs to incorporate views about the totality of possible outcomes Not just those selected to highlight portfolio vulnerabilities However stress testing can: Highlight under-appreciated risks (although might underemphasise idiosyncratic risk) Provide a way of generating effective discussion of risks that are widely recognised but no-one wants to tackle (governance failings)

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