Q.What are some of the new risk methodologies that are being used?
A. There are a lot, and the following may not be exhaustive but essentially I try to focus on creating an holistic risk approach, tail risk management and extreme events, dynamical correlation analysis and shift in correlation regime, dynamic volatility adjustment, macro risks as macro influence on the market has been important during the last years, improving looking forward and enhanced predicted volatility, developing multivariate stress testing, not relying on one risk model but use of different models (PCA/Fundamentals with different time series, half-life, time horizon, et al) and see how they react in different volatility regimes, liquidity stress testing, etc.
From Christian Szylar, Global Head of Risk and Performance Measurement at Marshall Wace LLP
Originally published on http://inalternativesblog.iirusa.com/
Related Articles: Risk Management in Hedge Funds –The Role of the Risk Manager