I am doing a research for stress testing in market risk. The usual process I found out for scenario testing is:
- Define risk factors upon the portfolio
- Define the desired scenarios
- Vary the risk factors and execute the different scenarios
- Interprete the scenarios
My problem is that I do not know how to define the risk factors for a portfolio? Which R
functionality could I use? For example, what are the risk factors for a simple FX portfolio when I consider the portfolio: EURUSD
, USDMXN
, AUDUSD
, USDJPY
and USDKRW
?
I really appreciate your answer!