A risk manager at a large bank holding company (BHC) has justtaken on the additional responsibility for stress testing the BHC'scapital plan. To prepare for the new role, the manager researehesbest practices for stress testing as part ofthe capital planningprocess. Which of the following aetions would be most appropriateto take during the stress testing process?
A. Use full revaluation methods for positions with nonlinear riskexposures.
B. Incorporate contingent actions and the impact of riskmitigation into the stress scenarios.
C. Model a long-duration shock in which asset prices fall slowlyover a long period of time.
D. Rely on historical averages for modeling losses due tooperational risks.
