Stress Testing

While the potential regulatory benefits are notable, stress testing should be viewed by financial institutions as more than just a regulatory check-box exercise and formality burden. Given the complexity of derivatives, this type of test is a kind of risk analysis that can help uncover significant exposures to undesired market events.

Stress testing aims to quantify the impact of an event or a series of events to a bank’s trading book or a fund’s portfolio. The event may be hypothetical and refer to something that hasn’t been previously observed in the markets. It may also reflect past market experience and result in asset price movements that correspond exactly to real price movements during a certain historical time period. The end result is a return or distribution of returns that reflects how a fund or portfolio might perform should a given scenario take place. The practitioner’s focus in stress testing is on the future, even if the stress scenario mirrors historical events.

Single EventStress Test
- Lehman collapse
- Dot-com Crash
Scenario analysis
- S&P 500 drops by 10%
- Interest Rates go up by 50bp
- Unemployment increases by 5%
Common PeriodsRegime Analysis
- Periods of Rising Rates
- Periods of High and Low Volatility
Parametric scenarios
- Correlations go to 1

At CLOUDRISK, we are focused on producing comprehensive, proven methodologies and models in support of your requirements. We use a full re-valuation of the trades for each stress-test scenario, leaving no room for any kind of approximations. Therefore even the most complex derivatives are captured accurately. Using a transparent and independent approach, we enable organisations to embrace a more rigorous methodology to analysing capital adequacy in a range of possible future economic scenarios.

CLOUDRISK has the flexibility to specify macroeconomic scenarios and variables independently or in collaboration with clients. Whilst multiple regulatory driven scenarios have been built-in to the system (including Fed, EBA and BoE) our flexible approach allows us to examine the things that matter most to you.

The Result You Can Expect


Optimization of operational risks and costs. No need to devote people internally or to acquire any additional knowledge, skills or complicated systems.


Clients do not have to worry about growing their number of holdings as the system capabilities can accommodate (almost) infinite number of instruments


Our “No Black Box” approach gives freedom to choose the best fitting model

Why Us?

What we offer is a managed service. We do what is necessary on behalf of our clients, from market data procurement to payoff modelling and every other operational aspect involved. Thus, there is no need for our clients to devote people internally nor to acquire any additional knowledge, skills or complicated systems. Key personnel dependencies and exposures are minimized which also reduces the overall operational expenses.


  • The most sophisticated and advanced model library able to capture any derivative instrument regardless of its complexity and structure
  • Price justification – We provide clients with thorough investigations and justification of the provided data when there is an unusual or suspicious price move. We also help them in price challenge resolutions and disputes with brokers and counterparties, when necessary
  • Freedom to choose from variety of options to pick the one that serves best your purposes
  • Testing strategies in real-life market conditions before applying them. Testing the effect of a portfolio addition before the actual purchase of the instrument
  • Understanding and managing the counterparty credit risk and its impact on pricing
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