- name
- risk-metrics-calculation
- description
- Calculate portfolio risk metrics including VaR, CVaR, Sharpe, Sortino, and drawdown analysis. Use when measuring portfolio risk, implementing risk limits, or building risk monitoring systems.
# Risk Metrics Calculation
Comprehensive risk measurement toolkit for portfolio management, including Value at Risk, Expected Shortfall, and drawdown analysis.
## When to Use This Skill
- Measuring portfolio risk
- Implementing risk limits
- Building risk dashboards
- Calculating risk-adjusted returns
- Setting position sizes
- Regulatory reporting
## Core Concepts
### 1. Risk Metric Categories
| Category | Metrics | Use Case |
| ----------------- | --------------- | -------------------- |
| **Volatility** | Std Dev, Beta | General risk |
| **Tail Risk** | VaR, CVaR | Extreme losses |
| **Drawdown** | Max DD, Calmar | Capital preservation |
| **Risk-Adjusted** | Sharpe, Sortino | Performance |
### 2. Time Horizons
```
Intraday: Minute/hourly VaR for day traders
Daily: Standard risk reporting
Weekly: Rebalancing decisions
Monthly: Performance attribution
Annual: Strategic allocation
```
## Detailed patterns and worked examples
Detailed pattern documentation lives in `references/details.md`. Read that file when the navigation tier above is insufficient.
## Best Practices
### Do's
- **Use multiple metrics** - No single metric captures all risk
- **Consider tail risk** - VaR isn't enough, use CVaR
- **Rolling analysis** - Risk changes over time
- **Stress test** - Historical and hypothetical
- **Document assumptions** - Distribution, lookback, etc.
### Don'ts
- **Don't rely on VaR alone** - Underestimates tail risk
- **Don't assume normality** - Returns are fat-tailed
- **Don't ignore correlation** - Increases in stress
- **Don't use short lookbacks** - Miss regime changes
- **Don't forget transaction costs** - Affects realized risk
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