CoachA risk factor is a market variable whose changes drive the value of positions: a yield at a tenor, an exchange rate, an implied volatility, a credit spread. A risk model describes the joint distribution of risk-factor changes over a horizon and revalues the positions under them.
Exemplos
Example 21.3 (The book)
A small USD book on 23 September 2026: long USD 200 million of a ten-year Treasury par bond, short USD 300 million of a two-year, long EUR 100 million, short JPY 5 billion, and short a three-month at-the-money EURUSD straddle on EUR 400 million (implied volatility 8%, held fixed). Its four risk factors are the daily changes in the two- and ten-year par yields (4.85% and 5.11% that day) and the log returns of EURUSD (1.1411) and USDJPY (157.92). Their EWMA daily volatilities are 6.4 and 5.7 basis points, 0.28% and 0.65%.