The Concept Of Stress Testing

Stress-testing is a term which has made it into the news a lot over the last three years. The phrase was once used mostly used in engineering or perhaps medicine. However, in recent times you could be forgiven for thinking that this was a financial term. Stress tests now seem to have been devised to be applied mostly to banks. Since the financial crisis of 2008, U.S. and European banks have undergone several rounds of tests and have been declared to be of varying health. Interestingly, this idea of a stress-test has its uses in personal finance as well. You could stress test various aspects of your financial situation and see how things would work out in crisis. First, let's see how the bank stress-tests were done. That will give us some idea of

This article was originally published on October 27, 2011.