Market risk is the potential for a loss in value of an investment portfolio when prices drop due to sources of systematic risk, or changes in risk factors that affect the entire market or market segments.
Market risk is commonly measured and communicated as Value at Risk (VaR), or the amount of a portfolio that is at risk of loss over a specified timeframe. For example, for a one-month 5% VaR of $1 million in a portfolio, there is a 1 in 20 chance of losing $1 million over a month’s timeframe. Determining a portfolio’s VaR is a complex process. Many financial risk managers employ sophisticated models to analyze, rank, and decide on appropriate strategies for managing market risk.
Leading financial institutions use MATLAB to build models and manage market risk. You can use Financial Toolbox to build customized models, perform Monte Carlo simulations, and analyze various scenarios to asses risk exposure arising from financial activities exposed to market risks.
Learn how to use MATLAB for financial risk management 47:31 (Webinar)