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A Multidimensional Framework for Risk Analysis
Gifford Fong and Oldrich A. Vasicek
Financial Analysts Journal
Vol. 53, No. 4 (Jul. - Aug., 1997), pp. 51-57
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4480008
Page Count: 7
You can always find the topics here!Topics: Investment risk, Interest rates, Securities markets, Security portfolios, Financial portfolios, Predisposing factors, Stress tests, Credit risk, Financial securities, Risk management
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The variety and complexity of portfolio holdings have given rise to the need for additional analyses for purposes of risk management. A framework for risk analysis includes three dimensions: sensitivity analysis, value at risk (VAR), and stress testing. This article describes each dimension and suggests a procedure for achieving a VAR measure. Once individual holdings are analyzed, attention can be directed to portfolio-level analyses and the types of output suitable for monitoring purposes. In combination, this framework can capture the important features of portfolio risk.
Financial Analysts Journal © 1997 CFA Institute