| stress test (FS-BA) |
Particular type of simulation that forms the basis of simulated risk parameters for events that are likely to have an economically negative affect on the bank#s portfolio.
A bank conducts export financing with addresses in Brazil. The bank does not require guarantees by credit insurers for first class addresses. Presidential elections are about to take place in Brazil, and depending on the result, the country#s financial situation could worsen. Stress tests should be used to analyze the effect of such a scenario on the bank's capital.