Portfolio stress testing
A practical scenario framework for rates, inflation, growth, volatility, correlation, and liquidity shocks.
Summary
Stress testing asks how a portfolio behaves when relationships change, not only when historical volatility repeats.
Why it matters
Diversification can weaken in a regime break. Scenario analysis exposes concentrations that position labels and normal-period correlations can miss.
What to watch
Rate and curve shocks
Inflation and growth shocks
Volatility and correlation shifts
Liquidity and FX stress
Research workflow
- 01Map economic exposures
- 02Define coherent scenarios
- 03Estimate direct and second-order effects
- 04Set watch conditions and response options