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“Don’t Panic” – Part II: Practical aspects - on how to navigate through choppy financial markets

posted Nov 28, 2018, 4:03 AM by Felix Fernandez   [ updated Nov 28, 2018, 4:08 AM ]
 In our last short paper on “How to navigate choppy financial markets”, we suggested to follow four principles:
  • First, to define the portfolio composition and exposure levels per asset class.
  • Second, to implement a well-prepared process for managing exposure in a crisis (being large or small) - either by hedging or by just buying or selling the assets.
  • Third, instead of moving in and out of choppy markets, to define target exposure by an appropriate risk measurement methodology, which has been thoroughly tested.
  • And fourth, to continuously manage exposure along the implemented process.

From the feedback we received so far, one of the most prominent questions was:

• “Which risk measurements do you use to control the hedging process?”

In this short paper we compare some common market risk measurements with stability analysis and discuss the results.

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Felix Fernandez,
Nov 28, 2018, 4:03 AM
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