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Transcript
Seminar: Timely Topics for
Today’s Business World
Mr. Bernstein
Risk
January 2015
Seminar: Timely Topics for Today’s
Business World
Mr. Bernstein
Common Risk Measurements: Standard
Deviation
A measure of the dispersion of a set of data from its mean the degree to which individual values vary from the
distribution mean. The higher the number, the greater
the risk.
Standard deviation is calculated as the square root of
variance.
Standard deviation is also known as historical volatility and is
used by investors as a gauge for the amount of expected
volatility.
2
Seminar: Timely Topics for Today’s
Business World
Mr. Bernstein
Common Risk Measurements: Volatility
The relative rate at which the price of an investment moves
up and down, found by calculating the annualized
standard deviation of daily change in price.
The amount of uncertainty or risk about the size of changes
in a security's value.
A higher volatility means that a security's value can
potentially be spread out over a larger range of values.
This means that the price of the security can change
dramatically over a short time period in either direction.
A lower volatility means that a security's value does not
fluctuate as dramatically.
3
Seminar: Timely Topics for Today’s
Business World
Mr. Bernstein
Example: One-year Single Stock Volatility
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Seminar: Timely Topics for Today’s
Business World
Mr. Bernstein
Common Risk Measurements: VaR
A technique used to estimate the probability of
portfolio losses based on the statistical analysis
of historical price trends and volatilities.
VaR is often quoted as the dollar value of mark-tomarket losses in the case of a 2 standard
deviation event.
5
Seminar: Timely Topics for Today’s
Business World
Mr. Bernstein
Historical Return Histogram (HRH)
6
Seminar: Timely Topics for Today’s
Business World
Mr. Bernstein
Historical Volatility Table (HVT)
7
Seminar: Timely Topics for Today’s
Business World
Mr. Bernstein
Historical Volatility Graph (HVG)
8