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Consider a simple example of one stress scenario, which we define as a probability distribution fstress (*) of the vector of factor returns. We simulate a vector of risk factor returns from the risk model, calling it f (*) , and we also simulate from the scenario distribution, fstress (*). If we...

hi all, i didnt know where else to post my thread.. :( i have found this great book where it explains how to perform back testing, however im not sure whether i understand it correctly (comment below).. i would be very gratefull if someone could draw a small example with real numbers how to...