World Championship Stress Testing

Original by Moody's, 2014, 4 pages 

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  • As part of the comprehensive capital analysis and review (CCAR) process, banks are required to maintain both champion and challenger models for stress testing.
  • Bank managers, likewise, should favor a competitive modeling framework, with the champion model being that which delivers the most strategic insight and the most accurate portfolio projections at the lowest possible cost.
  • Most banks, however, are choosing not to adopt a competitive stress test modeling structure. Instead, the standard process seems to be that banks will arbitrarily nominate, in advance, a certain model development initiative labeled the “champion” and a separate, more poorly funded and resourced project known as the “challenger.”