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Forecast Return Distribution in Aegis Risk Manager 2.0
Jun 1, 1998
By examining the forecast return distribution based on current security holdings, we can develop a more complete understanding of potential return outcomes than is possible by relying solely on the standard deviation of return. RAR/VAR analysis benefits greatly from our combined empirical and model-based approach, which estimates probabilities in the tails with far greater accuracy than would a normal distribution. Possible uses of this analysis include enhanced dialogues with clients and consultants, quantification of potential losses at different probability levels and versus different benchmarks, assessment of relative value among competing requests for capital allocation, and verification of risk levels for fiduciary and regulatory purposes.