A successor to VAR?

Regulators may be pressing banks to more rigorously stress test their portfolios, but when it comes to how hedge funds apply the technique, debate remains as to how and what they should be testing. John Ferry reports

In January, the UK's Financial Services Authority called on companies operating in the financial markets to fully embed stress testing into their risk management processes. Last July, the Basel Committee stated that it intends to change the market risk section of the Basel II framework to make stress testing part of the regular process for generating market risk information.

Traditionally, regulators have mainly focused on value-at risk as the key risk measure by which to benchmark bank exposures