Not quite. Stress-testing is more specific because it tests an entity's ability to withstand adverse conditions. Scenario testing is more general and just refers to seeing what happens under different conditions and those conditions don't have to be adverse.
To expand on this: Stress-testing and scenario testing are both risk assessment tools, but they differ in focus and scope.
Stress-Testing: Here, you push financial or actuarial models to their limits to see how they hold up under extreme conditions. For a Canadian insurance company, this could mean examining how the business would fare if, say, a catastrophic event led to a high volume of claims at once.
Scenario Testing: This involves considering specific situations or sequences of events that might impact the business. Unlike stress-testing, which might just look at worst-case figures, scenario testing involves storytelling. For example, "What if there's a new regulation, followed by an economic downturn?"
Both are crucial for making sure the company can withstand unexpected challenges and are likely tools you might use in actuarial work.
Comments
Not quite. Stress-testing is more specific because it tests an entity's ability to withstand adverse conditions. Scenario testing is more general and just refers to seeing what happens under different conditions and those conditions don't have to be adverse.
To expand on this: Stress-testing and scenario testing are both risk assessment tools, but they differ in focus and scope.
Stress-Testing: Here, you push financial or actuarial models to their limits to see how they hold up under extreme conditions. For a Canadian insurance company, this could mean examining how the business would fare if, say, a catastrophic event led to a high volume of claims at once.
Scenario Testing: This involves considering specific situations or sequences of events that might impact the business. Unlike stress-testing, which might just look at worst-case figures, scenario testing involves storytelling. For example, "What if there's a new regulation, followed by an economic downturn?"
Both are crucial for making sure the company can withstand unexpected challenges and are likely tools you might use in actuarial work.