Definition of Stress testing:
Companies that manage assets and investments commonly use stress testing to determine portfolio risk, then set in place any hedging strategies necessary to mitigate against possible losses. Specifically, their portfolio managers use internal proprietary stress-testing programs to evaluate how well the assets they manage might weather certain market occurrences and external events.
Stress testing is a computer simulation technique used to test the resilience of institutions and investment portfolios against possible future financial situations. Such testing is customarily used by the financial industry to help gauge investment risk and the adequacy of assets, as well as to help evaluate internal processes and controls. In recent years, regulators have also required financial institutions to carry out stress tests to ensure their capital holdings and other assets are adequate.
Manufacturing: A test conducted on some equipment to determine how much of a load the system can handle before it breaks or reaches its limit. A stress test is often used to determine the maximum load on software, and to evaluate if the software will be able to operate correctly in certain common situations.
How to use Stress testing in a sentence?
- Stress testing helps gauge investment risk and the adequacy of assets, as well as to help evaluate internal processes and controls.
- Stress testing is a computer-simulated technique to analyze how banks and investment portfolios fare in drastic economic scenarios.
- Regulations require banks to carry out various stress-test scenarios and report on their internal procedures for managing capital and risk.
Meaning of Stress testing & Stress testing Definition