RiskMetrics - Conclusion
- Introduction to Risk
- What is Risk?
- Risk and Opportunity
- Risk Preference
- Risk and Performance
- Importance of Risk
- Market Risk
- Event Risk
- Unique vs. systemic risk
- Sources of Risk
- Why Measure Risk?
- Introducing RiskGrades
- Using RiskGrades
Understand the importance of taking a portfolio perspective in measuring your risks
Risk measurement is an essential step in the cycle of risk management. Without the ability to quantify your risk, you cannot be fully conscious of potential outcomes and the likelihood of winning or losing. Would you play a game of roulette without knowing the odds first? Risk statistics distill vast amounts of historical information to help you make better decisions about the future.
Risk measurement is particularly powerful on a portfolio level. While you may have an intuition about individual stocks, it is difficult to visualize how many different investments are likely to move together without portfolio risk analysis. And remember, these numbers are real. When you make an investment, there will be bad days and months where XLoss will have a visceral meaning.
You should now be able to:
- Understand the meaning of volatility
- Use the RiskGrade measure to benchmark your investment risk
- Apply the XLoss measure to estimate your potential loss in extreme market conditions
- Analyze the risk of your entire portfolio and determine how well diversified your investments are
Tested in academia and on the trading floors of Wall Street, RiskMetrics now gives you the same powerful risk analysis tools to help you make better investment decisions and sleep more peacefully at night.