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Risk

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Analyzing Financial Data and Implementing Financial Models Using R

Part of the book series: Springer Texts in Business and Economics ((STBE))

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Abstract

This chapter discusses investment risks. We first demonstrate how to analyze individual security risk and then we analyze portfolio risk.

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Notes

  1. 1.

    The calculation above technically calculates the sample variance and sample standard deviation. For ease of exposition, we drop the term sample when describing variance and standard deviation.

  2. 2.

    Had we not squared the deviations from the mean, positive and negative deviations could offset each other.

  3. 3.

    Bank of International Settlements Basel Committee on Banking Supervision (May 2012) Consultative documents: Fundamental review of the trading book, retrieved from http://www.bis.org/publ/bcbs219.pdf

  4. 4.

    In fact, some texts may call our ES measure expected tail loss and use the term expected shortfall to denote the average loss that exceeds a benchmark VaR. We stay with our definition of ES, but bear in mind some texts may not have the same definition of ES. The general idea is the same except that the VaR limit from which the ES is calculated using either the portfolio itself or some benchmark portfolio.

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Authors and Affiliations

  1. Compass Lexecon, Chicago, Illinois, USA

    Clifford S. Ang

Authors
  1. Clifford S. Ang
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Correspondence to Clifford S. Ang .

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© 2015 Springer International Publishing Switzerland

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Ang, C. (2015). Risk. In: Analyzing Financial Data and Implementing Financial Models Using R. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-14075-9_4

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