Risk versus Return

KRM stores the simulations results at the position level, giving insight into the entire simulated return distributions, aggregated at user-defined grouping levels (portfolio, Instrument type, industry, country, …) as well as individual positions. It offers full flexibility to display all the relevant statistical risk measure (standard deviation, tracking error, downside risk measures). This provides more insight when standard risk metrics become less relevant to analyze unusual and extreme risk scenarios. Credit risk modelling and adjustments are also available through the explicit modeling of default probabilities in the multi-period simulation framework.

For instance, KRM provides the following risk\return analytics:

a) Downside Risk (VaR, CVar and Expected shortfall): Covered for any holding period, confidence level, and return weights (EWMA, GARCH, etc.) and any adjustment for prepayments, defaults or both.

b) Tracking Error: Volatility of the active portfolio. A KRM portfolio comprises the portfolio holdings (long position) and the benchmark holdings (short position). KRM generates and report the values and returns aggregated for both and the active portfolio. Forward looking multi-period, multi-factor driven tracking errors is readily available after a KRM multi-period forecast run has been processed.