13) Banks that use the internal models approach for meeting market risk capital requirements must have in place a rigorous and comprehensive stress testing programme to capture such potential stresses.
The stress testing programme must particularly address: (i) concentration risk; (ii) illiquidity of markets in stressed market conditions; (iii) one way markets; (iv) event and jump to default risks; (v) non linearity of products; (vi) deep out of the money positions; (vii) positions subject to the gapping of prices; and (viii) other risks that may not be captured appropriately in the VaR model (for example, recovery rate uncertainty, implied correlations and skew risk).