What are the limitations of stress testing?
Stress testing is a valuable tool, but it has limitations such as unrealistic scenarios, data quality issues, and over-reliance on models.
Can you explain how unrealistic scenarios affect the results?
Unrealistic scenarios can lead to misleading results, as they may not accurately reflect real-world conditions or risks.
What about data quality issues?
Data quality issues can skew results, as inaccurate or incomplete data can lead to incorrect assessments of risk.
How can organizations mitigate these limitations?
Organizations can mitigate these limitations by using diverse scenarios, improving data quality, and regularly updating their models.
Are there any alternatives to stress testing?
Yes, alternatives include scenario analysis, sensitivity analysis, and risk assessments that can complement stress testing.
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