Risk Management

STRATIFIED RISK MANAGEMENT

Line 1: We provide volatility filters and early warning signals to help you reduce your exposure in a timely manner.
Line 2: for each asset class, we identify whether we are in a bull-bear regime. When we are in a bear regime speculative positions should be avoided.
Line 3: Aggregate Risk, tests the overall exposure in terms of VaR and CVaR, and backtest the effectiveness of these metrics.
Line 4: Factorial Risk, measures the portfolio exposure to risk factors. Combined with the signals coming from the report could recommend some rebalancing.
Line 5: Individual Security Risk, tests the impact of individual securities on the different dimensions of the portfolio’s risks.
Line 6: Stress Testing and Management. We analyze the potential impact of economic shocks on the portfolio and prepare adequate plans to face them.

Switch from a backward-looking toward a forward-looking approach toward Risk Management by employing volatility filters extrapolated from options and powerful predictive models.
Employ macroeconomic-based and sentiment-based measures to assess the probability of a market crash.
Our proactive risk management approach aims at reducing the exposure of your portfolio right before the losses materialize.

We estimate the aggregate portfolio risk using a variety of advanced models including copulas, Monte-Carlo simulations, and Neural Network models.
Black swan risks are estimated with the Extreme Value Theory.
All our measures of risk are regime-dependent.
We report individual security risk and the risk contribution of each security to the total portfolio risk.
All our results are subject to rigorous scientific validation.

We create customized stress test reports based on stressing one or more macroeconomic or financial variables.
We make detailed plans to be ready to face the most challenging adversities.
Our plans include strategies to face both a geopolitical and a financial crisis.
We consider even adverse scenario specific to a single asset class like a sudden anomalous surge of interest rates or the collapse of some currencies.
We can estimate the indirect impact of a crash of one or more securities on the overall portfolio.

The decomposition of the portfolio risk into its components is fundamental for portfolio management.
Our approach allows us to monitor which risks we want in the portfolio and reduce unwanted risks timely.
We compute a factorial analysis of portfolio risks and combine it with our trading signals.
Our approach for the risk decomposition is nonlinear providing a more precise assessment with respect to the traditional approaches developed in the industry.