Historical Stress Test

Estimate portfolio impact using past market crises.

Historical stress testing applies actual market conditions from past crises (e.g., 2008 Financial Crisis, COVID-19 Crash) to estimate how your portfolio would have performed. It uses portfolio beta to scale market losses and provides a reality check for risk models based on actual extreme events rather than statistical assumptions.

Related Terms

Value at Risk (VaR)

The maximum expected loss at a given confidence level — but doesn't tell you how bad the tail is.

Scenario Analysis

Evaluate portfolio performance under hypothetical conditions.

Maximum Drawdown

The largest peak-to-trough loss before recovery — the worst realized loss.