Artificial portfolio stress-testing and how advisers add value to this process

In previous articles Quintin Rayer gave an overview of portfolio stress-testing, what it can and cannot do, offered a definition, and outlined the range of stress-test methodologies available with a classification, before focusing on historical stress-tests.  In this fifth article in the series he explores techniques used in applying artificial stress-tests to portfolios.

To recap, extreme market moves can negatively impact portfolios in ways which may not be captured by conventional risk measures and diversification breakdown may mean that portfolio values are not protected. With guidance, stress-testing may be used to estimate portfolios impacts and if necessary appropriate restructuring can limit the downside.  This helps demonstrate that advisers and investment managers are working hard to protect portfolios and clients can be reassured that robust investment processes are in place.

This article is the fifth in a series making up a helpful introduction to IFAs less familiar with portfolio stress-testing.  The previous articles can be found here:

Q G Rayer (2017), Artificial portfolio stress-testing and how advisers add value to this process, DISCUS, available at, 3 pages, 24 May 2017.


Download Article



Dr Quintin Rayer

About Dr Quintin Rayer

Quintin is a Chartered Fellow of the Chartered Institute for Securities and Investments, a Chartered Wealth Manager and holds a Physics degree from Imperial College London and a Physics doctorate in atmospheric physics from Oxford University and is a Fellow of the Institute of Physics.