Analyze the concept of stress test ...
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Analyze the concept of "stress test" as applied to financial institutions and create a better alternative for assessing the viability of a financial institution.
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Analyze the concept of "stress test" as applied to financial institutions and create a better alternative for assessing the viability of a financial institution.
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The stress tests that are used in financial institutions came under major crossfire during the last recession, in 2007-2008. Basically, a stress test determines if a bank has enough working capital under the worst possible scenario. While banks were passing stress tests for the majority, when the recession took place many banks failed, which proved they actually didn't have sufficient access to working capital under horrible economic conditions. A stress test ideally tests a few main points, including liquidity, credit risk, and market risk. The auditor or person conducting the stress test tests the bank or financial institution in these ...
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