Hi I'm having trouble understanding the practice difference between scenario testing and sensitivities. Could someone please give me an example. Thanks Georgina
Similar? Scenarios and stress tests Hi Georgina, The Swiss Solvency Test distinguishes between scenario evaluation and stress testing, see http://www.finma.ch/archiv/bpv/download/e/SST_Evaluation_of_Scenarios_2006_03_30.pdf Hope this helps, Cheers Esther
Hi. In addition to Esther's example, it might be worth looking at the definitions of (a) stress testing (b) sensitivity analysis (c) scenario testing as in the October 2010 exam (Q3). (a) Stress testing measures loss under extreme values of the chosen variable (without necessarily considering the probability of that extreme event). (b) Sensitivity analysis is simialr to stress testing but under less extreme variations. It is used to investigate what would happen if individual assumptions shifted slightly. (c) Scenario testing usually refers to the process of measuring the impact of changes to two or more variables under devised “what if” scenarios – again without necessarily considering the probability of that scenario.
