There is no one measure of risk that is “the best” or even always appropriate. Investor Analytics encourages our clients to look at multiple measures of risk and to use more than one model to obtain a better sense of the various market risks in their portfolio.
While Value-at-Risk has become an industry standard tool, it should not be used exclusively. Scenario analyses, worst case losses, sensitivities to market factors, transparency, “what-if” and other risk measures provide a range of different analyses that help a portfolio risk manager do their job better. But at the end of the day, no system and no risk measure can substitute for the expertise and judgment of the portfolio manager.
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