Risk Metrics Technical Document

The risk metrics technical document revolves around the RiskMetrics variance model, which is also called the exponential smoother. Some of the aspects that a riskmetrics technical document focuses on include Risk Measurement Framework, Statistics of Financial Market Returns, Risk Modeling of Financial Instruments, and riskmetrics data sets. The riskmetrics technical document helps in measuring market risks related to foreign exchange, equities, commodities, and other income instruments. It takes into account various portfolio risk measures including standard deviation, value at risk (VaR), expected tail loss or conditional VaR (CVaR), marginal VaR, and Incremental risk including incremental expected shortfall (IES).

Sample Risk metrics Technical Document:

Riskmetrics Technical Document

Subject: This RiskMetrics technical document has been created by Mr. Lee Johnson and will be used for promoting a greater transparency of various market risks that BITech is prone to.

Created by:  Mr. Lee Johnson

Reviewed by: Ms. Katherine Kamara (BITech)


This is an important note that confirms the fact that sophisticated analytics using softwares will not be able to replace the professional and experienced judgment required for managing risks. RiskMetrics is basically a high-quality tool that can be used by professional risk managers and it cannot guarantee specific results.

Review: This RiskMetrics technical document will review the following

a)      The conceptual framework of BITech that underlies the various methodologies normally used for estimating market risks

b)      Financial market return statistics of BITech

c)      Modeling financial instrument exposures based on a variety of financial market risk factors

Refinement of Methodology

a)      Expanded framework: Extensively working on refining BITech’s analytical framework, which will further help in analyzing options risk.

b)      Data synchronization algorithm: This will help in redefining the correlation estimates and volatility of those BITech’s products that are not traded in same time zone.

c)      New market: Expansion of daily data sets and including fixed income as well as equity markets and estimated volatilities as well as correlations of additional foreign exchange in Eastern Europe and Asia Pacific.

Posted in Technical Documents