The Following Is NOT a Valid Step in Scenario Analysis

Multiple Choice

The following is NOT a valid step in scenario analysis (popularly known as stress testing) :

A) select a particular set of "scenarios" that the firm wants to protect against
B) scenarios can correspond to various states of the economy represented by paths of the state variables (which may be a collection of macroeconomic variables such as inflation,gross domestic product,unemployment,and interest rates)
C) the set of scenarios can be generated by changing the state variables by some known amounts (such as raising interest rates by 1 percent or decreasing unemployment by 2 percent)
D) for these scenarios,the firm computes the losses realized on its assets and liabilities
E) the firm computes VAR based on the scenarios selected