Stocks fall and a strategy falls with them, but their combined loss stays inside the household's budget. Does that mean the household can simply wait for recovery? Not if income stops next month while a care bill comes due.
A stress test puts inconvenient conditions together and asks which constraint fails first. We will use three independent scenario cards: joint price declines, a price gap past an intended exit, and assets that retain value but cannot provide payment cash. Predict which looks most dangerous before calculating.
Test capacity, without pretending to forecast
You will construct a reproducible joint scenario, check household, account, and strategy constraints separately, and work backward from a failure condition to a review action. Historical maximum drawdown describes an observed path; it does not bound every future loss.
A scenario asks what follows if specified conditions occur together. It is not a probability forecast. Federal Reserve bank stress testing similarly uses hypothetical conditions and explicitly distinguishes scenarios from economic forecasts.1 We borrow that conditional reasoning, not bank capital standards or regulatory thresholds for households.
Explain why conditions might coincide. Employment income and employer stock may suffer together. Reduced risk appetite can make different strategies sell simultaneously, while impaired trading limits liquidation. Adding unrelated worst numbers does not establish a statistically supported “once-in-a-century” event.
Start all three cards from one unchanged snapshot
C8-79 is a synthetic exercise dated October 28, 2026. All monetary figures below are in units of RMB 10,000: 4 means RMB 40,000. They are not dollars or suggested household allocations.
Household A originally has bank cash of 30, existing stocks of 20, necessary reserves of 14, and unassigned cash of 16. Its other original conditions, including housing, restricted funds, and liabilities, are unchanged. For this stress snapshot only, 4 has already moved from the bank into a strategy and is fully invested. There is no borrowing, other order, or additional funding obligation.
The starting assets in this exercise are therefore bank 26 + existing stocks 20 + strategy 4 = 50. Moving money into the strategy created no household wealth and is not evidence that G75 approved live trading. Each card restarts here; do not apply the second shock to the first card's already reduced balances.
The household's joint financial-investment loss budget remains 12. For this exercise, a strategy loss reaching 1.5 pauses new commitments for review; separate-account equity below 2 triggers an account-disposition review. These are teaching policies. Strategy and account happen to contain the same funds, but their triggers perform different jobs. Do not add 1.5 and 2 into a supposed protection of 3.5.
G75's additional policy of retaining at least 1 of stress headroom also remains. Under that policy, joint loss must not exceed 11. The 12-unit budget does not silently cancel this extra condition.
Put cash on a payment calendar
The original 14 reserve has distinct uses: 2 for the first 30 days; a special payment of 6 in month 4; four interrupted-income months starting on day 31, each with necessary payments of 2 and reliable receipts of 0.8, leaving a monthly gap of 1.2; and a separate repair bill of 1.2 in month 2. The total is 2 + 6 + 4.8 + 1.2 = 14, with no overlap.
Cards 1 and 2 use that calendar. Bank cash starts at 26, becomes 24 after the first month's payment, and then falls to 21.6 in month 2, 20.4 in month 3, 13.2 in month 4, and 12 in month 5. Income subsequently resumes and fully covers ordinary spending through month 7, with no new net outflow.
The 0.8 receipts are supplied as reliable and received before the corresponding payments. They do not restore the interrupted main income. Neither the strategy nor the old stocks is sold to fund these cards' payments. A market-value decline is not another bank bill, and an investment balance is not automatically cash in the payment account.
Card 1: prices fall together, with room left
At the beginning of month 2, existing stocks fall 40% and strategy assets fall 30%, alongside the specified four-month income interruption and payments. Values then remain unchanged through month 7. Trading remains available, but payments do not depend on asset sales.
Existing stocks fall from 20 to 12, losing 8. The strategy falls from 4 to 2.8, losing 1.2. Joint loss is 9.2, below both the 12 budget and the 11 headroom condition. Strategy loss has not reached 1.5, and account equity of 2.8 is not below 2.
Bank cash still ends at 12. Specified financial assets at month 7 total 12 + 12 + 2.8 = 26.8. Reconcile independently: initial 50 minus investment loss 9.2 minus net cash spending 14 also equals 26.8. That identity catches both omissions and double deductions.
Passing applies only to this card. It does not verify that income really resumes on time or cover taxes, currency changes, or a longer interruption. Headroom permits further investigation rather than certifying all future risks.
Card 2: a gap triggers three different reviews
Restart at bank 26, stocks 20, and strategy 4, with the same payment calendar. At the beginning of month 2, old stocks fall 50%. Strategy assets gap overnight from a reference price of 100 to 40, a 60% decline. The exercise supplies complete sale at 40 with no extra fees. Proceeds of 1.6 remain as strategy-account cash and never enter the bank. Prices and cash returns are unchanged afterward.
Old stocks lose 10 and the strategy loses 2.4, for joint loss of 12.4. The household budget is breached, including the additional headroom condition. Strategy loss exceeds 1.5 and account equity of 1.6 is below 2. These are different actions responding to the same losses; adding the three alarm amounts would count them again.
An intended exit near 80 cannot justify recording only a 20% decline. A stop trigger does not guarantee the fill price, and a stop-limit order may remain unfilled when the market passes its limit.2 The 40 fill is a synthetic input, not a real execution guarantee or an added stop rule for C2.
Bank cash still ends at 12. Old stocks are worth 10 and strategy cash 1.6, giving 23.6, also equal to 50 − 12.4 − 14. This card fails investment-loss conditions while meeting the supplied living-payment schedule. Pause new commitments, verify actual fills and old-position exposure, and review disposition under the registered policy. “We can still pay the bills” does not approve a new position.
Card 3: the smaller market loss is not the safer cash path
Restart again. At the beginning of month 2, stocks lose 35% and the strategy loses 25%, with no later value changes. Losses are 7 and 1, totaling 8. Strategy equity is 3; neither internal trigger is reached.
But income interruption now lasts six months from day 31, reliable monthly receipts fall from 0.8 to zero, and necessary payments remain 2 each month. A new care bill of 10 in month 2 is explicitly separate from ordinary spending, the special payment, and repairs. Stocks worth 13 and strategy assets worth 3 cannot supply sale proceeds for the scheduled payments through month 7.
| Bank checkpoint | Cards 1 and 2 | Card 3 balance or cumulative funding gap |
|---|---|---|
| Start | 26 | 26 |
| After month 1 | 24 | 24 |
| After month 2 | 21.6 | 10.8 |
| After month 3 | 20.4 | 8.8 |
| After month 4 | 13.2 | 0.8 |
| After month 5 | 12 | Gap 1.2 |
| After month 6 | 12 | Cumulative gap 3.2 |
| After month 7 | 12 | Cumulative gap 5.2 |
Month 2 requires ordinary spending of 2, repair of 1.2, and care of 10. Month 4 also requires the special 6. The first inability to pay in full occurs in month 5. Later negative amounts represent cumulative financing shortfalls if the other conditions remain unchanged, not permission to overdraw or records of payments actually completed.
Total required cash is 2 + 6 × 2 + 1.2 + 6 + 10 = 31.2, exceeding the bank's 26 by 5.2. Only 8 was lost on investments, but the payment objective fails. Investigate adjustable obligations, confirmed available resources, and receipt dates first. An unapproved loan, an assumed sale, or an expected rebound is not confirmed cash.
Work backward from failure
Reverse stress testing begins with a failed constraint rather than a grand crisis narrative. In Card 2, strategy loss of 2.4 leaves 9.6 of the 12 budget for stocks. A 20-unit stock holding reaches that loss at a 48% decline; a larger decline breaches it. Retaining 1 of headroom permits only 8.6 of stock losses, or 43%. These are conditional boundaries, not event probabilities.
For Card 3 without the new care bill, cash needs are 21.2. The bank's 26 leaves 4.8 available. Under the same timing and access restrictions, additional necessary spending above 4.8 creates a gap within the horizon. Keep monthly checkpoints: a failure can precede the final date.
An operationally useful policy says what happens next. If an updated scenario lacks full available cash by any payment date, pause new commitments. If an investment budget or strategy trigger is reached, freeze the current version and reconcile orders and actual holdings for the designated reviewer. Resume only after confirmed funding, checked order states, and a newly passing stress table—not automatically after a few days or one profitable trade.
Change the cash conditions yourself
Explain. Card 3 loses 1.2 less on investments than Card 1. Why does it encounter trouble sooner?
Reference answers · reveal
Answer. Reliable receipts disappear, the interruption lasts longer, an extra care bill arrives, and investments cannot supply payment cash. A smaller market loss answers a different question from whether a bill can be paid on its due date.
Transfer. Reduce Card 3's care bill from 10 to 6. Separately, confirmed outside funds of 2 are available before month 4's payments, without borrowing. Keep everything else unchanged. Calculate month 7 with and without those funds, checking earlier dates too.
Answer. Without the contribution, need is 21.2 + 6 = 27.2, leaving a final gap of 1.2. Month 4 ends at 4.8, month 5 at 2.8, and month 6 at 0.8; the first gap now occurs in month 7. Timely receipt of 2 raises each balance from month 4 onward by 2 and leaves 0.8 at the end, with no earlier shortfall. “Someone will help eventually” without a receipt time does not establish a pass. The contribution changes cash funding, not the strategy's investment result.
Save three cards and a trigger rule
For each independent starting point, save shock times, asset losses, income and dated spending, liquidation and receipt restrictions, all three levels of budget checks, first failure date, action, and missing evidence. Reverse one failure threshold, and retain both the original and revised transfer exercise.
Check that cards were not chained, reserves were not deducted twice, market losses were not treated as living bills, and funding gaps were not shown as completed negative-cash spending. The supplied tables need only arithmetic; an AI should expose the same intermediate balances.
Follow the joint effect on investments, income, and access to cash, then find the first constraint to fail. That tells you whether to obtain funding, reduce commitments, revise spending, or maintain zero new exposure. Do not adjust the stress assumptions merely until the proposal appears to pass.
References
- Federal Reserve: 2026 Stress Test Scenarios, final scenarios. Hypothetical conditions are not economic forecasts; no bank capital threshold or published asset decline is imported into this household exercise.
- Investor.gov: Stop, Stop-Limit, and Trailing Stop Orders—Investor Bulletin, July 13, 2017; updated August 18, 2026. Trigger versus fill price and possible nonexecution of a stop-limit order.
Editorial status
AI-assisted draft synchronized to the accepted second-round Chinese source. C8-79 uses independent synthetic renminbi scenarios. See the author review. A separate AI reviewer has completed an independent full-text and bilingual review. Human financial review and target-reader testing have not been performed and are not scheduled for this edition.