Scenario Analysis(Banking) Law and Legal Definition

Scenario Analysis is the process of estimating the expected value of a portfolio after a given period of time. It is measured by assuming specific changes in the values of a portfolio's securities or key factors like changes in interest rates affecting security values.

In banking, scenario analysis is the process of modeling anticipated effects of interest rate changes on the net income or capital of a financial institution. The system incorporates assumptions for changes in the behavior of the institution's managers and its customers, anticipated to be associated with the modeled changes in interest rates.