Quintin looks at how stress-testing investment portfolios can help managers actively protect portfolio values against extreme market events and demonstrate they are working hard to protect client portfolios.
Extreme market moves can negatively impact portfolios in ways which may not be captured by conventional risk measures, making meaningfully assessing portfolio risks challenging. Portfolio stress-testing helps identify and quantify risks, helping reassure a manager how their portfolio might respond to significant market events or scenarios that reflect particular concerns.
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Q G Rayer (2017), The increasing value of stress-testing investment portfolios, Citywire Wealth Manager, issue 384, p12, 2 February 2017.