Jamilu Auwalu Adamu

ABSTRACT

Black – Scholes Formula has being seriously and widely criticized as the one of the major components that contributed to the 2007 – 2008 financial and economic crises especially in the industry of Financial Derivatives that worth over $500 trillion before the crises. The BLACK – SWAN events theory of Nassim N. Taleb has drastically suppresses the over reliance of NORMALITY ASSUMPTIONS almost in all of the Derivatives Pricing Models. Though, Banks Regulators and Supervisors, Basel II and III dealt comprehensively and extensively about the idea of Stress Testing, meanwhile, the Stress Testing methodologies from sensitivity test, scenario analysis, and historical scenarios to hypothetical scenarios were based on IMPLICIT ASSUMPTIONS. Nevertheless, they contributed immensely in addressing Global Economic and Financial Crises.