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Tuesday, December 21, 2010
Wednesday, February 17, 2010
Don't miss FactSet's upcoming Risk events
The next few weeks are the perfect time to see FactSet's risk tools in action. Catch us at these events.
March 10 Seminar
Risk: The challenges of multiple asset classes
Join FactSet and the CFA Toronto for a luncheon on March 10, where Senior Product Manager Bill McCoy will address the multiple challenges of building a risk model that truly meets the needs of multiple asset classes.
March 11 Seminar
Fixed Income Management Essentials: From single bonds to risk analysis
We'll be in Boston on March 11 from 9:00 a.m. to 1:30 p.m. to present a comprehensive and educational event on the challenges of managing a fixed income workflow.
March 11 Luncheon
Risk for Super Funds
In Melbourne, we'll discuss why Super Funds should not only be thinking about risk, but analyzing it in a sophisticated way. FactSet and our risk partners APT, Barra, and Northfield will describe how Super Funds can measure, manage, and understand the risks they are taking or external managers are taking on their behalf.
March 17 Live webcast
Accurately Measuring Risk Across Asset Classes
Most risk models are either equity focused with some fixed income flavor or fixed income models with some rudimentary equity addition. An accurate total risk model must unite, in one framework, descriptors of various equity, currency, and fixed income risks to provide a very granular view of both equity and fixed income markets. Only this type of model can truly report risk across asset classes.
Daniel Satchkov will demonstrate how to accurately measure risk across all asset classes through a collection of risk statistics such as Value at Risk (VaR), Expected Tail Loss, Kurtosis, Skewness, Tracking Error, Stress Testing, and others.
For the latest in FactSet events, follow us on Twitter @FactSet.
March 10 Seminar
Risk: The challenges of multiple asset classes
Join FactSet and the CFA Toronto for a luncheon on March 10, where Senior Product Manager Bill McCoy will address the multiple challenges of building a risk model that truly meets the needs of multiple asset classes.
March 11 Seminar
Fixed Income Management Essentials: From single bonds to risk analysis
We'll be in Boston on March 11 from 9:00 a.m. to 1:30 p.m. to present a comprehensive and educational event on the challenges of managing a fixed income workflow.
March 11 Luncheon
Risk for Super Funds
In Melbourne, we'll discuss why Super Funds should not only be thinking about risk, but analyzing it in a sophisticated way. FactSet and our risk partners APT, Barra, and Northfield will describe how Super Funds can measure, manage, and understand the risks they are taking or external managers are taking on their behalf.
March 17 Live webcast
Accurately Measuring Risk Across Asset Classes
Most risk models are either equity focused with some fixed income flavor or fixed income models with some rudimentary equity addition. An accurate total risk model must unite, in one framework, descriptors of various equity, currency, and fixed income risks to provide a very granular view of both equity and fixed income markets. Only this type of model can truly report risk across asset classes.
Daniel Satchkov will demonstrate how to accurately measure risk across all asset classes through a collection of risk statistics such as Value at Risk (VaR), Expected Tail Loss, Kurtosis, Skewness, Tracking Error, Stress Testing, and others.
For the latest in FactSet events, follow us on Twitter @FactSet.
Wednesday, February 10, 2010
A quick VIX?
by special guest blogger Matthew van der Weide, FactSet Quantitative Specialist, Amsterdam
On this stage, we have discussed the suitability of a risk model in terms of matching its forward looking horizon to a client’s investment process. I’m the first to agree that this indeed is an important dimension and should be considered carefully. What use has a risk prediction if the information is too late to react to? That said, I have noticed a trend among the different risk model providers to provide shorter term horizons in addition to their standard models. Both Barra and Axioma provide shorter and longer term versions of their risk models, and Northfield has produced near term versions of most of its models. The major focus of such models is to pick up increased levels of risks faster. Now, one could philosophise whether these additional horizons have arrived in time and whether they could have provided adequate warning signals for the multi sigma events we encountered in late 2008, but the fact remains that these models are here now and can provide useful insight if deployed in the right manner.
To highlight this responsiveness, consider the observed jump in the VIX over the last couple of weeks (while not all encompassing, the VIX is considered a valid proxy as a broad indication of perceived risk in the markets). As a broad indicator, the recent movement gives as an opportunity to see if and when a short-term model picks up on such an event. To do so, I decided to look at the absolute risk levels of some broad indices, in this case the FTSE All World, S&P 500, and MSCI Europe. I did this using the R-Squared Global Risk model, a daily updated model designed to predict risk on the ultra short horizon and to be very responsive.
Considering the above charts, we clearly see increases in the levels of risk after spikes in the VIX, especially during the last week. The magnitude of the impact in the spike seems related to the amount of exposure to the U.S. Market in our three indices (VIX is a measure of the volatility of the U.S. S&P 500 Index options).
Now consider the monitored impact on a monthly model. It’s going to be both less timely and a more drastic. This because the factor variances will be updated from month end to month end, so a fund may perceive a shock in predicted risk from one day to the other (when the model updates), while the fund composition itself didn’t change.
We’re not suggesting a quick fix here, saying one should only look at short term risk. But we do advocate multiple horizon measurement; longer term risk management may reflect the strategy of a fund, but when markets volatility rises, the information and analysis permitted through a shorter term model carries real value.
Subscribe by e-mail to receive new Taking Risk posts as they are published.
On this stage, we have discussed the suitability of a risk model in terms of matching its forward looking horizon to a client’s investment process. I’m the first to agree that this indeed is an important dimension and should be considered carefully. What use has a risk prediction if the information is too late to react to? That said, I have noticed a trend among the different risk model providers to provide shorter term horizons in addition to their standard models. Both Barra and Axioma provide shorter and longer term versions of their risk models, and Northfield has produced near term versions of most of its models. The major focus of such models is to pick up increased levels of risks faster. Now, one could philosophise whether these additional horizons have arrived in time and whether they could have provided adequate warning signals for the multi sigma events we encountered in late 2008, but the fact remains that these models are here now and can provide useful insight if deployed in the right manner.
To highlight this responsiveness, consider the observed jump in the VIX over the last couple of weeks (while not all encompassing, the VIX is considered a valid proxy as a broad indication of perceived risk in the markets). As a broad indicator, the recent movement gives as an opportunity to see if and when a short-term model picks up on such an event. To do so, I decided to look at the absolute risk levels of some broad indices, in this case the FTSE All World, S&P 500, and MSCI Europe. I did this using the R-Squared Global Risk model, a daily updated model designed to predict risk on the ultra short horizon and to be very responsive.
Considering the above charts, we clearly see increases in the levels of risk after spikes in the VIX, especially during the last week. The magnitude of the impact in the spike seems related to the amount of exposure to the U.S. Market in our three indices (VIX is a measure of the volatility of the U.S. S&P 500 Index options).Now consider the monitored impact on a monthly model. It’s going to be both less timely and a more drastic. This because the factor variances will be updated from month end to month end, so a fund may perceive a shock in predicted risk from one day to the other (when the model updates), while the fund composition itself didn’t change.
We’re not suggesting a quick fix here, saying one should only look at short term risk. But we do advocate multiple horizon measurement; longer term risk management may reflect the strategy of a fund, but when markets volatility rises, the information and analysis permitted through a shorter term model carries real value.
Subscribe by e-mail to receive new Taking Risk posts as they are published.
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