Research library

INVESTIGATION 07 / STRESS & CLIMATE

Make the adverse case

Which combination of shocks would break the portfolio?

Scenario analysisReverse stressSensitivity

01 / THE PRACTICAL QUESTION

A decision, before a model.

A risk committee asks which combination of market shocks could produce a loss large enough to breach its tolerance.

The analyst’s decision

Find shocks that reach a specified loss, then assess whether those assumptions are plausible.

02 / DATA & COMPARISON

The idea in plain language.

Conventional stress testing starts with shocks and calculates losses. Reverse stress testing starts with the loss and searches for shocks that cause it.

Transmission model
The mapping from a change in a risk factor to a change in portfolio value.

Data. Constructed scenarios; official scenarios are contextual references.

Baseline. Unstressed exposure values and transparent factor shocks.

03 / THE EXPERIMENT

What the saved experiment shows.

The saved linear example reaches a 10% loss with an equity shock of −10% and a spread-factor shock of +5%, satisfying its constraint to numerical precision. The result is conditional on this transmission model.

Inspect the supporting result

Evidence record: research-validation.json#numerical_checks/07

Explore the related lab

04 / RESULTS & LIMITATIONS

Evidence with its boundaries attached.

The related lab is a cross-project demonstration. Read this investigation’s evidence and limits before transferring its conclusions.

Inspect numerical checks and validation records

Loading validation evidence…

Interpretation limit

A scenario is conditional, not a probability forecast or regulatory submission.

05 / REPRODUCE

Reproduce and challenge the result.

Code, configuration, and reproduction

The project contains its implementation, configuration, tests, and walkthrough. Download the lab configuration to record the exact parameters used in an interactive run.

Project code and walkthrough