What is main difference between stress testing, scenario analysis and stressing models?

Is it good to assume, stress testing is sensitivity analysis, scenario analysis is changing all assumptions in one direction (best, base and worst case) and stressing is changing specific assumption(s) to extremes?

i think so, that was my understanding too.

Scenario analysis is stressing all assumptions.

Stress testing is stressing 1 assumption.


Sensitivity analysis is about understanding how much a change in your inputs/assumptions will impact whatever outcome you’re trying to measure.

For more on the topic check out a sensitivity analysis course online or read up on it here (page 19).

A scenario is simply a group of assumptions. Stress testing is looking at the most extreme cases.

That would be sensitivity analysis.

A sensitivity test is used to identify which variables have big individual influence on output with just small changes in each variable.

Stress tests on the other hand are used to identify the effect of large changes in a variable, i.e. stressing them.

Finally scenario tests look at the effect of changing multiple variables to create a particular scenario (because stress tests are not so applicable to the real world as variables tend not be stressed in isolation but together as they are correlated).

The first two are single variable tests (small movement, large movement), whereas the third is a multi variable test.