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Starting Points for Learning Portfolio Risk Measures

Article Quant Q&A · Author: Guifan Li
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Summary

The discussion responds to a beginner seeking practical ways to learn measures such as value at risk, downside risk, beta, and correlation. It points first to a review paper that traces the development of portfolio risk measures, from early probability ideas through portfolio theory to conditional value at risk, and mentions less familiar measures such as the Treynor ratio. It also suggests using an R analytics package whose documentation and introductory vignette include formulas and references for experimentation.

A second answer recommends foundational books on decision theory and risk, along with a historical account of the role of risk in modern civilization. These are recommendations rather than a worked tutorial: the exchange supplies no calculation examples, comparison of estimators, or guidance on implementation choices. Readers will need to consult the cited literature and software documentation to learn how individual measures are computed and where their assumptions apply.

Key ideas

  • A review paper can provide a historical overview of portfolio risk measures and their development.
  • An R performance analytics package is suggested for experimenting with risk calculations and consulting formulas.
  • The exchange recommends foundational books on risk and decision theory as broader background.
  • The discussion offers reading suggestions rather than worked calculations or practical implementation details.

Tags

Risk managementStatistics
Full text
# Calculate risk measures (book recommendation)?


# Calculate risk measures (book recommendation)?












I am a beginner to Risk and I am trying to start a project that it can calculate risk measures like `VaR`, `LSTD`, `Beta`, Correlation so I would like to systematically learn how those number are calculated pragmatically.

Could someone recommend me some books so that I can get started? Appreciate about that.

## Answer by vonjd (score 5, accepted)

https://quant.stackexchange.com/a/30968

A good starting point is the following paper:

Risk Measures in Quantitative Finance by Sovan Mitra (2009)

From the abstract:

"[...] Despite risk measurement’s central importance to risk management, few papers exist reviewing them or following their evolution from its foremost beginnings up to the present day risk measures. This paper reviews the most important portfolio risk measures in Financial Mathematics, from Bernoulli (1738) to Markowitz’s Portfolio Theory, to the presently preferred risk measures such as CVaR (conditional Value at Risk). We provide a chronological review of the risk measures and survey less commonly known risk measures e.g. Treynor ratio."

For your own experiments I recommend the PerformanceAnalytics R package.

The documentation is quite exhaustive and has many formulas and references included.

The vignette gets you started.

## Answer by Atul Agarawal (score 2)

https://quant.stackexchange.com/a/30975

There is a vast literature on Risk. The books of Arrow, Raiffa, and Borch are a good introduction. See also Bernstein (1996) for compelling argument that the understanding of Risk was one of the key developments of modern civilization.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.