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Stress testing

\strɛs\ \ˈtɛstɪŋ\

A risk management technique applied to longevity risk where the effect of a given change or ‘stress’ to longevity is measured.

The classic stress test is to look at the effect on liabilities of a change to life expectancy of 1 year. Knowing these effects can give actuaries a good rule of thumb for using with their calculations. However, some claim that this stress test is not intuitive to understand and in addition use a scenario modeling to provide more accessible stress tests.

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