Fabric’s Approach to Scenarios
Research Paper
December 15, 2023
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This paper originally appeared on Fabricrisk.com. MSCI purchased Fabric — now known as MSCI Fabric — in December 2023.
Scenarios are a way of positing the material risks that come from the combined effect of events and market vulnerability that can propagate across the markets. At its core, a scenario is not a number, it is a narrative. Like a thriller, it is a story with twists and turns. A catalyst gets the action going. The current market environment is its setting, perhaps investor exuberance and leverage, tight money and credit constraints, or high concentration and momentum. The core of understanding risk, the task of building scenarios, is not mechanical and is not trivial. It is alive as a narrative.
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