Stress Testing: Linking Stress Events To Biz Strategies

NEW YORK--Risk managers beware: unless done properly, stress testing--valuing a portfolio under selected extreme market events--can yield the same dangerously deceptive risk conclusions as Value at Risk (VaR). At issue within the stress testing framework, according to risk experts, is the subjective task of selecting extreme market events that are appropriate to a firm's business, and then convincing senior management to allocate capital to offset the potential, yet unlikely losses, as opposed