Risk Management

At EC Assets, risk comes before return: loss tolerance is defined first and expected return is the residual. This guide collects the Knowledge Hub's risk-management entries - the measures (VaR, expected shortfall), the processes (stress testing, risk budgeting) and the sizing discipline that turn a collection of positions into a portfolio with bounded outcomes.

All entries in this guide

• Expected Shortfall - Expected shortfall, or conditional value-at-risk (CVaR), is the average loss in the cases where…
• Kelly Criterion - The Kelly Criterion sizes a position as edge over odds: f = (bp - q) / b, the fraction of capital that…
• Leverage - Leverage is the use of borrowed capital to increase investment exposure.
• Liquidity - Liquidity is the ease of converting an asset to cash at a fair price.
• Notional Exposure - The face value of the assets a position controls, as distinct from the capital committed to it.
• Sharpe Ratio - The Sharpe Ratio measures the excess return of an investment over the risk-free rate, divided by the…
• Stress Testing - Evaluating a portfolio under specified severe conditions instead of statistical distributions.
• Value at Risk - Value at Risk (VaR) estimates the loss that a portfolio would not exceed with a stated probability over a…

More topic guides

• Options & Derivatives
• Volatility
• Macro & Multi-Asset
• Performance Measurement
• Hedge Funds & Alternative Strategies
• Portfolio Construction
• Fund Structure
• Fund Operations
• Asset Allocation

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