Arrow_Blue_Orange.pngStress Testing for Alphas



In this paper, we took the stress-testing process one step further and showed how the resulting contributions to expected loss could be used as inputs to construct portfolios for each specific stress scenario. Using the process described, investors can also construct candidate portfolios representing a hedge for each scenario and include the target portfolio in their risk management process during rebalancing.



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Author: 
Olivier d'Assier, Head of Applied Research, APAC
Arrow_Blue_Orange.pngStress Testing for Alphas



In this paper, we took the stress-testing process one step further and showed how the resulting contributions to expected loss could be used as inputs to construct portfolios for each specific stress scenario. Using the process described, investors can also construct candidate portfolios representing a hedge for each scenario and include the target portfolio in their risk management process during rebalancing.

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Author: 
Olivier d'Assier, Head of Applied Research, APAC