Implementation of price testing

The purpose of this chapter is to provide the risk practitioner with an overview of the
key goals and challenges of designing and implementing a price testing strategy for
an organization. It identifies the users of price testing reporting from both a minimum
required control and added value perspectives.
Price testing and provisioning are sometimes spoken of in the same context and
sometimes viewed as separate exercises. In some organizations these responsibilities
are sometimes performed by separate functions at different points in time or upon
separate cycles. Regardless of the organizational structure and timing, the chapter
is written to cover the key concepts of price testing and to be fungible across
organizational structures.
An overview of the design of the document is:
Ω Objectives and defining the control framework – setting the game plan for the
location or organization that lead to developing the strategy, implementation and
performance benchmarks
Ω Implementing the strategy – decision time is required when the theoretical
approach of how price testing is to be performed meets with the reality of
actually performing the task with incomplete data and balancing this with other
responsibilities.
Ω Managing the price testing process – challenges in getting the most coverage with
the best sources of data within the agreed deliverable time
Ω Reporting – with price testing, don’t drop the ball before the goal line. Reporting
for basic control purposes is a requirement. With a little more effort and identifying
target audiences, added value can be obtained to support decisions on trading
strategies and booking.