Reverse stress test

Is there a difference between a “Reverse Stress Test” and a “Stress Test”?



Recent example I did at work. Stress test: you increase COGS by 5% and see what happens Reverse Stress test: you first look at what level of COGS drives your operating profit below a threshold (using goal seek in Excel), and then run additional stress tests.

Reverse stress test is used to determine wether a particular stress test is valid and is still appropriate as a risk measure tool.

Stress Test: Event > Effect on risk factors > effect on portfolio

Reverse Stress Test: Risk factors> Hypothetical Event> Effect on portfolio