Risk Glossary

Name Definition Download
Stand-Alone Volatility Stand-Alone Volatility is estimated using the backtest method. It is defined as being equal to the annualized standard deviation of returns from the backtest.
KeyQuant Risk uses 254 (number of trading days per annum) backtested returns exponentially weighted (α = 99%).
KRisk - Exponential Volatility.pdf
Ex-Ante Volatility Ex-Ante Volatility is estimated using the backtest method. It is defined as being equal to the annualized standard deviation of returns from the backtest.
KeyQuant Risk uses 254 (number of trading days per annum) backtested returns exponentially weighted (α = 99%).
KRisk - Exponential Volatility.pdf
Contribution to Volatility The contributive volatility takes into account the correlation between market positions held at the portfolio level. It represents the level of volatility of a specific market position vis-a-vis the global portfolio.
Contribution to volatility of market i is equal to ωi x βi with β = Ω x ω / volatility and Ω a covariance matrix with an exponential smoothing (α = 99%).
The volatility of the portfolio is equal to the sum of the contributive volatility of each market position.
Margin to Equity Margin figures are estimated and are calculated using exchange margin requirements. Margin to equity is calculated using the sum of estimated initial margin divided by NAV.
Actual margin requirements may vary and margin analysis provided is not intended to be an accurate representation of actual initial margin requirement or margin to equity ratio.
Global Economic Factor ("GEF") The Global Economic Factor ("GEF") is a proprietary indicator measuring the strength of global economic trends.
KeyQuant uses this indicator to systematically increase or decrease the portfolio exposure. The GEF can vary anywhere from 0.5 to 1.5, whereby 1.0 is the average risk, 0.5 is minimum risk, and 1.5 is maximum risk.
Value at Risk VaR is estimated using the backtest method: Its value corresponding to the selected percentile of the return series. When the selected percentile corresponds to a value situated between 2 points in the return series, its value is determined by performing a linear extrapolation between the 2 selected data points. For example, for a series of 254 return data points, the 5th percentile equals to 12.7 (254 x 5%), thus a return situated between the 12th and 13th worst returns. We calculate the value of this figure as:
(12.7 - 12) / (13 - 12) = 70% x 13th return + (1 - 70%) = 30% x 12th return
Conditional Value at Risk The CVaR is estimated using the backtest method. It is equal to the average of the backtested returns which are inferior to the VaR values for the same level of confidence level and given time horizon.
Historical Stress Tests Historical scenarios have been selected by identifying events from 1990 to 2015 when markets have displayed large price movements. Stress Tests.pdf
Series of future contracts By definition, a future contract has a set expiration date. In order to study trends and estimate risk, one needs to link the contracts to create a price series.
KeyQuant Risk rolls financial contracts 2 trading days before expiration. Exception: For short term rate contracts, time series with a fixed time to expiration are recreated to avoid misleading calculations due to time effect.
Commodity contracts are "rolled" 5 trading days before expiration.
SG Trend Index The SG Trend Index is equal-weighted and reconstituted annually. The index calculates the net daily rate of return for a pool of trend following based hedge fund managers. A factor of 0.9 is applied to the SG Trend Index when compared to the Key Trends UCITS; a factor of 1.35 vs. the Key Trends 15 Fund; and a factor of 1.8 vs. the Key Trends 20 Composite. Click here to have more information: https://cib.societegenerale.com/en/sg-prime-services-indices/.
Sharpe Ratio Sharpe Ratio is a measure of risk-adjusted performance of an asset. It is calculated by dividing the Annualized Return of the asset by its Realized Volatility. Sharpe Ratio measure if an investment is well risk-rewarded ie if good returns come with substantial additional risks.
Downside Volatility Downside Volatility is calculated like Realized Volatility but only negative returns are taken into account. It has been designed to address downside risk measure more specifically than Volatility.
Sortino Ratio Sortino Ratio is a modification of Sharpe Ratio where Realized Volatility has been replaced with Downside Volatility. Thus, it presents a more realistic picture of the downside risk ingrained in a financial asset.
Skewness Skewness is a measure of asymmetry of a distribution function. The Skewness for a normal distribution is zero. Negative values for the skewness indicate data that are skewed left ie left tail is long relative to the right tail.
Kurtosis Kurtosis is a measure of whether data are peaked or flat relative to a normal distribution. Data with high Kurtosis (> 3) tend to have a distinct peak near the mean, decline rapidly, and have heavy tails. Normal Distribution have a Kurtosis of 3.
Ulcer Index Ulcer Index is measure of depth and duration of drawdowns in prices from earlier highs. The greater a drawdown in value and the longer it takes to recover to earlier highs, the higher the Ulcer Index. It is computed as the square root of the mean of the squared percentage drawdowns in value.
Adjusted Leverage Total notional amount for futures contracts (duration adjusted for bonds and interest rates).