Risk metrics calculation

Risk Metrics Calculation

Comprehensive risk measurement toolkit for portfolio management, including Value at Risk, Expected Shortfall, and drawdown analysis.

When to Use This Skill

• Measuring portfolio risk
• Implementing risk limits
• Building risk dashboards
• Calculating risk-adjusted returns
• Setting position sizes
• Regulatory reporting

Core Concepts

1. Risk Metric Categories

Category	Metrics	Use Case
Volatility	Std Dev, Beta	General risk
Tail Risk	VaR, CVaR	Extreme losses
Drawdown	Max DD, Calmar	Capital preservation
Risk-Adjusted	Sharpe, Sortino	Performance

2. Time Horizons

Intraday:   Minute/hourly VaR for day traders
Daily:      Standard risk reporting
Weekly:     Rebalancing decisions
Monthly:    Performance attribution
Annual:     Strategic allocation

Detailed patterns and worked examples

Detailed pattern documentation lives in references/details.md. Read that file when the navigation tier above is insufficient.

Best Practices

Do's

• Use multiple metrics - No single metric captures all risk
• Consider tail risk - VaR isn't enough, use CVaR
• Rolling analysis - Risk changes over time
• Stress test - Historical and hypothetical
• Document assumptions - Distribution, lookback, etc.

Don'ts

• Don't rely on VaR alone - Underestimates tail risk
• Don't assume normality - Returns are fat-tailed
• Don't ignore correlation - Increases in stress
• Don't use short lookbacks - Miss regime changes
• Don't forget transaction costs - Affects realized risk