Document Type
Conference Proceeding
Publication Date
2015
Abstract
This paper describes a methodology extension for decomposing non-linear portfolio risk by fund manager which we refer to as "Manager Component Value-at-Risk". The approach is well suited to funds holding any asset class or instrument type including derivatives. This decomposition approach is additive and fully captures the correlations between instrument returns and thus is well suited for decomposing risk by manager. We provide an example from a representative CTA portfolio that demonstrates superiority of the decomposition approach over other common practices for risk decomposition. The core methodology is implemented in R and made available to readers.
Recommended Citation
Dixon, Matthew Francis, Risk Decomposition for Fund Managers (May 31, 2015). R/Finance, Chicago, 2015.
Comments
Presented at R/Finance Conference, Chicago, 2015.