Instead of doing financial projection on a "best estimate" basis, a company or its regulators may do stress testing where they look at how robust a financial instrument is in certain crashes, a form of scenario analysis. They may test the instrument under, for example, the following stresses: (Plurk Paste)

1
2
3
4
5
6

Instead of doing financial projection on a "best estimate" basis, a company or its regulators may do stress testing where they look at how robust a financial instrument is in certain crashes, a form of scenario analysis. They may test the instrument under, for example, the following stresses:
What happens if equity markets crash by more than x% this year?
What happens if GDP falls by z% 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 200%?

Direct link: https://paste.plurk.com/show/k8hpMmi4bPR5T0F3YcHq

Plurk paste