Whereas an ordinary stress test derives a loss from a scenario, a reverse stress test works backward from the loss to the scenario. Consider a hypothetical example in which a position loses 100 million yen for each 1% fall in stock prices and 1 billion yen for each 100bp rise in interest rates, and the unacceptable loss is 5 billion yen. Stock prices alone must fall 50% to reach it, but if rates rise 200bp, a 30% fall in stock prices is enough. The institution then discusses whether such combinations could occur and uses the result to review its positions and limits.
Reverse stress testing
- Japanese
- リバース・ストレステスト
- Last reviewed
- September 26, 2026
This is a draft, shown for review before publication.
Reverse stress testing is a stress test that first fixes an unacceptable outcome, such as the capital ratio falling below the regulatory minimum or funding running out, and then searches for the events that would lead to that outcome. It is used to find weaknesses that ordinary scenarios tend to miss.