Sunday, February 22, 2009

Stress test on the bank: Testing Stability

From http://www.nytimes.com/2009/02/23/business/23bank.html.
What can happen in the worst day of that firm?
What can their loss be?
How much would the loss be?

This is what we have been discussing in the 4350 class.

This stress test that is going to be tested against the U.S banks exactly aims to answer the question listed above.

It would take several weeks to complete the test and depending on the result we would know if the company needs more capital or it is good as it is now.

Due to this stockholders for these U.S banks started to worry about the value of those stocks.

It is a good thing to measure the outcome in "what if" scenario.
And risk managers often approaches to risk in such manner.

However, it says that the scenario that will be given has the possibility of "highly will not happen" to the firm.

I hope that the outcome of the test does not scare the shareholders to the point where they decide to massively give up on their investment portfolios which they have with the company.
I think that can create a even worse chaos.

No comments:

Post a Comment