Extreme risk measures are computed directly from historical Barra factor data that has been adjusted by historical covariance, which is then updated to reflect the current market environment.

A wide range of papers on extreme risk management, written by the Barra analytics research team responsible for the development of BxR, can be found in our Research Database or look under Resources to the right for a selection.

Clients can use Barra Extreme Risk (BxR) to help them:

• access multiple views of risk, which can complement clients’ use of Barra factor models. By focusing on large losses or gains, BxR can offer additional insight. The BxR analytics are similar to standard Volatility analytics, so extreme risk can be analyzed using familiar tools (Marginal Contributions to Risk, Risk Contribution, Beta, Correlation, Correlation Risk Attribution risk decomposition)
• analyze extreme correlation, which measures the likelihood of extreme losses (or gains) happening at the same time across different factors, and assets
• analyze extreme gains, providing insight into the asymmetry of bets and possible large upside potential, using familiar tools and dimensions