a. Value at Risk (VaR):
- VaR measures the potential loss in value of a portfolio over a defined period for a given confidence interval. Mathematical techniques like historical simulation, variance-covariance, and Monte Carlo simulations are used to calculate VaR.
b. Risk Metrics:
- Metrics such as Beta (which measures a stock’s volatility relative to the market) and Standard Deviation (which measures total risk) are used to assess and manage risk in portfolios.
