Risk metric
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A risk metric is the abstract concept in financial risk management quantified by risk measures. When choosing a risk metric, an agent is picking an aspect of perceived risk to investigate, such as volatility or mean return.[1]
Risk measure and risk metric
In a general sense, a measure is an algorithm for quantifying something. A metric is our interpretation of the number.[2] In other words, the method or formula to calculate a risk metric is called a risk measure.
Value at risk metric
The VaR risk metric summarizes the distribution of possible losses by a quantile, a point with a specified probability of greater losses.[3]
Examples
- Standard deviation or Volatility
- Mean
- Absolute deviation
- Expected shortfall
- Sharpe ratio
- Sortino ratio
- Value at risk
See also
- Risk measure
- Coherent risk measure
- Deviation risk measure
- Spectral risk measure
- Distortion risk measure
References
- ↑ Holton, Glyn A. (2004). "Defining risk" (pdf). Financial Analysts Journal 60 (6): 19–25. Retrieved March 11, 2012.
- ↑ Glyn A. Holton (2002). "Risk Measure and Risk Metric". Retrieved March 11, 2012.
- ↑ Jorion, Philippe (2006). Value at Risk: The New Benchmark for Managing Financial Risk (3rd ed.). McGraw-Hill. ISBN 978-0071464956.
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