Introducing Variety in Risk Management

Details Introducing Variety in Risk Management Introducing Variety in Risk Management

2001-07-10

arxiv.org/abs/cond-mat/0107208v1

Physics

Condensed Matter

Statistical Mechanics

12 pages, 5 figures, to appear in Risk

Scientific paper

We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability density function of daily returns is discussed. The results obtained are compared with the ones of a one-factor model showing strengths and limitations of this model.

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