I was looking at Basel proposed interest rate shocks. Using the standard US Treasury Yield Curve for the period starting from September 2017 to August 2019, I was able to construct Steep and Flat scenarios as highlighted in the link above. In general, they do make sense given the current yield curve for US Treasuries:
My question now is what further adjustments do these stressed curves need? One subject that comes to mind is the "no arbitrage-ness" of the curve. Do I have to make sure that the curve does not present arbitrage opportunity? If so, how?
Any other adjustments that I need to make sure before feeding the stressed yields to valuation models and regression models with other risk factors?