Challenge

Computing non-additive statistics (VaR, Expected Shortfall and Std Deviation) on portfolios requires aggregating simulated returns from the position level. In order to compute VaR on a re-weighted portfolio without re-generating simulated returns, you need to re-weight the simulated returns and then re-aggregate. This is far more more challenging if you do not have position level simulations for some of the portfolios (i.e. Hedge Platform) and requires a more robust method for aggregating simulations at multiple hierarchies.

Solution

Red Swan’s Integrated Risk Database stores and manages simulated returns at any level of aggregation. The Risk Aggregation Cube enables on-the-fly computation of risk when weights are changed, without having to regenerate simulated returns from the risk engine.

Result

Asset managers who are getting both position level data in RiskManager for managed accounts or internally managed portfolios are now able to aggregate that together with HedgePlatform data to measure aggregate risk across the entire portfolio of investments.