Stress Testing of Liquid Fund and Money Market Mutual Fund Schemes

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....utual Fund Schemes 1. Risk Management framework has been prescribed by SEBI vide circular dated September 30, 2002. As a part of risk management framework, Mutual Funds (MFs) carry out stress testing of their portfolio, particularly for debt schemes. In order to standardize this practice across industry, AMFI came out with Best Practice Guidelines dated September 12, 2014 on stress testing of L....

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....ll be tested on the following risk parameters, among others deemed necessary by the AMC: i. Interest rate risk ii. Credit risk iii. Liquidity & Redemption risk d. While conducting stress test, it will be required to evaluate impact of the various risk parameters on the scheme and its Net Asset Value (NAV). The parameters used and the methodology adopted for cond....

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.... ii. Scope of coverage of the stress testing policy and the levels of stress applied iii. Integration of the stress testing framework in the day-to-day risk management processes iv. Adequacy of the corrective actions and the efficacy of the systems for their activation g. Further, Trustees shall be required to report compliance with this circular and steps taken t....