Stress VaR estimates potential losses using historical stress scenarios (2008 financial crisis, COVID-19 crash, etc.) rather than recent market conditions. While standard VaR uses the past 1-2 years of data, Stress VaR uses extreme historical periods to ensure capital adequacy during crises. Basel III requirement: Banks must calculate both standard VaR and Stress VaR; capital requirements use the higher of the two. For example, standard 99% VaR might be $50M using calm 2019 data, but Stress VaR using 2008 conditions could be $200M — capital is based on $200M. Benefit: Prevents complacency during calm periods. Limitation: Assumes future crises resemble past ones (the next crisis is always different).