Measuring Market Risk in Asset Management

In this article, we offer a practical definition of market risk and show how to measure it. Beginning with an overview of fundamental concepts, such as asset returns, volatility, and correlation, we proceed to explain the estimation of widely used risk metrics, namely the value at risk (VaR) and the expected shortfall (ES), as well as the less commonly known expectile-based VaR (EVaR). Furthermore, we illustrate how these risk measures can be integrated into portfolio selection strategies. To provide practical insight, we consider a portfolio comprising two bonds and two stocks as a case study. Through this example, we apply the discussed concepts in real-world scenarios. Additionally, we present several examples to enhance the reader comprehension and facilitate a deeper understanding of the material

Authors

Publication Details

Journal
The Journal of Portfolio Management
Published
2024-10-18
DOI
https://doi.org/10.3905/jpm.2024.1.641
Citations
1
Primary Topic
Insurance and Financial Risk Management
Type
article
Field-Weighted Citation Impact
1.13
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article

Measuring Market Risk in Asset Management

Frank J. Fabozzi, Michele Leonardo Bianchi, Gian Luca Tassinari
1 citations
The Journal of Portfolio Management
Insurance and Financial Risk Management
1.13
article

Measuring Market Risk in Asset Management

Frank J. Fabozzi, Michele Leonardo Bianchi, Gian Luca Tassinari
article en
1 citations

Abstract

In this article, we offer a practical definition of market risk and show how to measure it. Beginning with an overview of fundamental concepts, such as asset returns, volatility, and correlation, we proceed to explain the estimation of widely used risk metrics, namely the value at risk (VaR) and the expected shortfall (ES), as well as the less commonly known expectile-based VaR (EVaR). Furthermore, we illustrate how these risk measures can be integrated into portfolio selection strategies. To provide practical insight, we consider a portfolio comprising two bonds and two stocks as a case study. Through this example, we apply the discussed concepts in real-world scenarios. Additionally, we present several examples to enhance the reader comprehension and facilitate a deeper understanding of the material

The Journal of Portfolio ManagementVol. 51(2)
Openalex Percentile: Top 11%
Insurance and Financial Risk Management
1.13
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