Abstracts

This paper is about the risk management of a portfolio of global assets from a practical quantitative finance perspective. The intention is to provide concepts, understanding and possibly guidance to the activity of financial risk control in the real world of investments.
The paper will approach the subject of risk management by three avenues: (1) finance theory, statistics and computing; (2) economic concepts, markets knowledge and intuition and (3) thematic perspectives and historical events.
At level 1 we will cover the main tools, models and applications of finance, statistics and computing in order to be able to quantify the risks of a portfolio on several relevant conditions. At level 2 we will attempt to merge the technical / quantitative knowledge of level 1 with two central fields of investments: markets and economics. Very often the subject of “risk management” does not take into account actual markets and economic conditions.
Finally we have at level 3 the subjective dimension of risk control as complementing economic knowledge we have historical events generating institutions and shaping behavior as well as “themes” that allow us to understand at each point in time the main sources of risk on the portfolio´s investment horizon. This will be illustrated with several results and simulations from a realistic portfolio of international liquid financial assets.