A Multidimensional View of Risk: Integrating Time-Series and Factor Risk Models to Enhance Decision-Making
Risk managers can apply risk-factor models to enhance investment decision-making and elevate the role of risk management within the front office. Traditional time-series models use metrics like value at risk to quantify how much risk a portfolio bears. Factor models address the strategic dimensions: where risk comes from, why it matters and what actions we might take to address these risks.
Correlation estimates between MSCI USA Investable Market Index stocks and a hypothetical 10-year zero-coupon Treasury bond, based on a factor and time-series model with comparable half-life. Based on the MAC.L model for the factor model, and an exponentially weighted moving average, six-day returns and a 0.9956 decay factor for the time-series model. As of July 1, 2024.
Read the full paper
Provide your information for instant access to our research papers.
Embrace the future of risk for more resilient portfolios
Transform your risk management with analytics that aim to provide a more holistic view of risk, deliver faster insights and add value to portfolio management.
AI Portfolio Insights and the Future of Risk Management
The role of risk management for institutional investors is evolving. Risk leaders are looking to broaden their teams’ focus beyond traditional risk measurement and increase their influence with investment teams. How could AI help?
Macro Scenarios in Focus: Stagflation Remains Downside Scenario
Geopolitical tensions and the risk of higher oil prices heighten fears of stagflation, in which a hypothetical multi-asset-class portfolio could lose 12%.
The content of this page is for informational purposes only and is intended for institutional professionals with the analytical resources and tools necessary to interpret any performance information. Nothing herein is intended to recommend any product, tool or service. For all references to laws, rules or regulations, please note that the information is provided “as is” and does not constitute legal advice or any binding interpretation. Any approach to comply with regulatory or policy initiatives should be discussed with your own legal counsel and/or the relevant competent authority, as needed.