Okuzeka
Finance & Banking vocabulary · Risk Management

Reverse stress testing

Meaning in finance & banking, with examples

nounAdvanced term

In finance & banking, reverse stress testing means: Starting from a failure outcome and identifying scenarios that could cause it.

In Turkish: ters stres testi

How it is used

Contrast it with testing a predetermined shock; the starting point is an unacceptable outcome.

Example sentences

  1. Reverse stress testing identified the withdrawals that would exhaust the liquidity buffer.

    The analysis works backwards from buffer exhaustion.

  2. The board used reverse stress testing to challenge the recovery assumptions.

    Failure conditions reveal where management actions may be insufficient.

Common collocations

  • conduct reverse stress testing
  • reverse stress testing scenario
  • stress testAn analysis that checks whether a bank would have enough capital and liquidity to survive a severe but possible shock, such as a deep recession.
  • risk assessmentThe process of identifying possible risks, estimating how likely they are and how much harm they could cause, and deciding how to manage them.

More terms: Risk Management

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This page explains English vocabulary for learners. It is not financial advice.