Preparing a duration stress sheet your risk team will actually use
Stress sheets fail when they list dramatic moves nobody believes. Build twists from the curve segments your book truly owns.
A Duration Stress Review only helps if the sheet survives contact with your risk team. Dramatic parallel shocks look serious in a slide deck and die in the first question: “Why 120 basis points here?”
Prefer named segments
Stress the two-year, five-year, ten-year, and long bond points you trade — not a theoretical continuous curve your systems do not price. Add one twist where the belly cheapens relative to the wings if that is the scenario your committee already fears.
Write assumptions in plain language
“Assumes auction supply remains elevated for two sales” is better than “volatility regime shift.” Fixed-income yield curve tracking is partly a language discipline.
Leave room for disagreement
The best sheets we deliver include a blank row for the committee’s own shock. Ownership of the scenario matters more than our preferred number.