The Essentials of Risk Management, Second Edition, 2nd Edition

Appendix 16.1

THE 2013 DODD-FRANK SEVERELY ADVERSE SCENARIOS

The “severely adverse” scenarios designed by U.S. regulators for the 2013 round of Dodd-Frank Act stress testing included trajectories for 26 economic variables. For this round of stress tests, regulators communicated the values of the variables to banks in the fall of 2012, and the results were published in spring 2013.

The 26 variables included 14 variables that captured economic activity, asset prices, and interest rates in the U.S. economy and financial markets. The other 12 variables consisted of three variables (real GDP growth, inflation, and the U.S./foreign currency exchange rate) applied to each of four countries/country blocks. These four countries/country blocks covered ...