As a risk analyst at a large bank, you are tasked with conducting a stress test that requires projecting the bank's revenues, losses, and capital ratios on a quarterly basis over the next two years. To ensure the stress test aligns with best practices, what specific actions or assumptions should you propose?

Exam-Like

Use a full-revaluation approach to model the bank's complex derivative exposures.

46.5%

Use minimum required regulatory capital ratios as the initial trigger for potential contingency capital actions to be taken.

17.1%

Assume that the bank will exit its riskiest lines of business and reduce its expenses during the stress test horizon period.

12.4%

Model the loss given default of the bank's loan portfolio using a weighted-average approach at the aggregate portfolio level.

24.0%

Financial Risk Manager Part 2