Which of the following is not an approach used for stress testing:
A.
Algorithmic approaches
B.
Historical scenarios
C.
Monte Carlo simulation
D.
Hypothetical scenarios
The Answer Is:
C
This question includes an explanation.
Explanation:
Choice 'c' is the correct answer as Monte Carlo simulations are not used to generate stress scenarios. They are applicable to VaR calculations under certain situations, and are not used for stress tests. The other three represent valid approaches to stress testing.
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