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Bank Stress Tests

Summary:
Backgrounder at wiki here. They may test the instrument under, for example, the following stresses:  What happens if unemployment rate rises to v% in a specific year?  What happens if equity markets crash by more than w% this year?  What happens if GDP falls by x% in a given year?  What happens if interest rates go up by at least y%?  What if half the instruments in the portfolio terminate their contracts in the fifth year?  What happens if oil prices rise by z%? I notice that they don't have one like "What if bank reserve assets increase suddenly by x% in one week?"

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Backgrounder at wiki here.

They may test the instrument under, for example, the following stresses: 
What happens if unemployment rate rises to v% in a specific year? 
What happens if equity markets crash by more than w% this year? 
What happens if GDP falls by x% in a given year? 
What happens if interest rates go up by at least y%? 
What if half the instruments in the portfolio terminate their contracts in the fifth year? 
What happens if oil prices rise by z%?

I notice that they don't have one like "What if bank reserve assets increase suddenly by x% in one week?"

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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