Risk Measurement: Sensitivity and Volatility
Interactive

Risk Measurement: Sensitivity and Volatility

Intuition Publishing
Updated Aug 26, 2020

Risk management begins with sensitivity measures equivalent to position sizes. The risk manager will combine these and generate some form of probability distribution of outcomes. By translating these into monetary gains and losses an overall exposure can be determined. Here we look at how banks perform risk sensitivity assessments to measure risk and how
they get an overall risk "picture" using techniques such as value at risk (VaR).