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:
I really appreciate your answer!