Work out stress test loss instantly with clear inputs, formula shown and shareable results.
Stress testing multiplies the baseline default rate by a severe but plausible factor and recomputes losses. The incremental loss above the baseline is what capital must absorb, since expected loss is already covered by provisions and pricing.
Stressed loss
Stressed loss = exposure × (baseline PD × multiple) × LGD
Figures are estimates based on the inputs given. Bank charges, regulatory minima and market rates change and differ between institutions and jurisdictions. This is not financial advice — confirm with your bank or treasury policy.
Because recessions raise default frequency several-fold, and historical severe periods provide the multiple.
Yes ideally — collateral values fall in the same downturn, so recovery rates deteriorate together with defaults.