risk-metrics-calculation

SKILL.md

Risk Metrics Calculation

Comprehensive risk measurement toolkit for portfolio management, including Value at Risk, Expected Shortfall, and drawdown analysis.

When to Use This Skill

Measuring portfolio risk

Implementing risk limits

Building risk dashboards

Calculating risk-adjusted returns

Setting position sizes

Regulatory reporting

Core Concepts

1. Risk Metric Categories

Category
Metrics
Use Case

Volatility
Std Dev, Beta
General risk

Tail Risk
VaR, CVaR
Extreme losses

Drawdown
Max DD, Calmar
Capital preservation

Risk-Adjusted
Sharpe, Sortino
Performance

2. Time Horizons

Intraday:   Minute/hourly VaR for day traders
Daily:      Standard risk reporting
Weekly:     Rebalancing decisions
Monthly:    Performance attribution
Annual:     Strategic allocation

Detailed patterns and worked examples

Detailed pattern documentation lives in references/details.md. Read that file when the navigation tier above is insufficient.

Best Practices

Do's

Use multiple metrics - No single metric captures all risk

Consider tail risk - VaR isn't enough, use CVaR

Rolling analysis - Risk changes over time

Stress test - Historical and hypothetical

Document assumptions - Distribution, lookback, etc.

Don'ts

Don't rely on VaR alone - Underestimates tail risk

Don't assume normality - Returns are fat-tailed

Don't ignore correlation - Increases in stress

Don't use short lookbacks - Miss regime changes

Don't forget transaction costs - Affects realized risk