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Discussion Paper
Evaluating Empirical Regularities in Variable Comovement in Stress Test Scenarios
Each year, the Federal Reserve Board conducts a stress test of large banks to assess their ability to withstand economic downturns while continuing to lend and meet their obligations. These stress tests include severely adverse scenarios which feature 13-quarter paths of key macroeconomic and financial variables that factor into the calculation of projected capital losses of the stress-tested institutions.