Answer: Both I and II.

## Explanation Reverse stress tests are used by institutions for both reasons: **I. To test events that threaten the viability of the institution** - This is correct. Reverse stress testing starts with identifying a specific adverse outcome (such as bankruptcy or severe capital depletion) and then works backward to determine what scenarios could lead to that outcome. **II. To assess where multiple risks occur simultaneously** - This is also correct. Reverse stress testing is particularly valuable for identifying scenarios where multiple risk factors interact simultaneously, which might not be captured in traditional forward-looking stress tests. Reverse stress testing differs from traditional stress testing in that it: - Starts with a predefined adverse outcome - Works backward to identify scenarios that could cause that outcome - Helps identify vulnerabilities and interdependencies between risks - Is particularly useful for identifying "tail risks" and systemic vulnerabilities Therefore, both statements I and II are valid reasons why institutions use reverse stress tests.

Author: LeetQuiz .