The Client is a family office that has seen a significant expansion in its portfolio in terms of volume, diversity in instruments and markets in the last 3 years. This led to an increasing requirement for an efficient and robust measurement and reporting tool for risk management.
The Client wanted us to develop a Value at Risk (VaR) model for their portfolio
Solution
JMI team assessed the client’s portfolio and evaluated risk across underlying assets, e.g. stocks, futures, currency, commodities and indices to build a replicating portfolio.
Under consideration of the client’s models for possible movements of the underlying asset prices, the team simulated a large number of scenarios consisting of potential price paths.
Using these scenarios, JMI team calculated the portfolio’s overall VaR as a percentile of the portfolio’s Monte Carlo risk distribution.
Calculated the correlation between the different asset classes, Sharpe ratio and risk metrics to provide insights on portfolio performance.
Monitoring the model and reporting real time, end of the day VaR on 95% and 99% fallouts to the client’s risk manager regularly.
Computed Asset Allocation on weekly basis as per given asset allocation mandate given by family office.
Outcome
JMI model provided real time insights in to VaR , Sharpe ratio and other risk metrics to control the risk exposures.
Client gathered a complete risk profile of their portfolio spread across different asset class.
