IRISKAWARE

IRISKAWARE

We often discover 'things that appeal to us' by experimentation. Our favourite foods, drinks, clothes, cosmetics, friends and partners are often located and confirmed through repeated personal experiments - show me the candidate; show me the evidence; let me select. In economics, this process is often referred to as 'revealed preference'.

IRISKAWARE follows a method of revealed preference to help you locate an investment framework for your portfolio that is acceptable to you - and based ONLY its risk of extreme loss.

The method presents you with a grid of 90 feasible investment strategies to choose from. By hovering the cursor over a grid square or clicking on a grid square, you will see the estimated RISK estimate for the underlying strategy - with NO other information.

For any risk strategy that you click in the tableau, you need to contemplate and consider the following information:

A RISK ACCEPTANCE RULE based on EXTREME PORTFOLIO RISK

In any month, there is a 5% chance the value of this portfolio could decrease by
MVaR% - and if this occurs, the expected loss for this portfolio will be MES%.”

 

Where MVaR% is an estimate of the ‘tail risk’ 5% cut-off point AND MES% is the expected loss associated with this strategy (including MVaR).

A simple decision context: here is a feasible investment strategy; these are its risk characteristics; do you like what you see? Using this approach, we avoid distracting concepts such as: ‘risk tolerance’; ‘risk attitude’; ‘risk appetite’; and ‘risk profile’ to get to an answer for the key question – “In any month, which portfolios are least likely to deliver me a loss that I am NOT willing to bear?”

IRISKAWARE helps you identify those investment frameworks that ‘let you sleep at night’ – based ONLY on your reaction to measured portfolio risks. The process continues until you locate 3 strategic frameworks with acceptable risk properties – at which point a ‘centroid’ is added.

The risk space defined by this framework explicitly defines an area of target risk that you are willing to bear in the portfolio implementation stage in IRISKONLINE.

A .PDF report is available (for a small fee) and may be shared freely with your friends and professionals.

Then, you may UPLOAD 1 or more of your preferred strategies into IRISKONLINE where they can be further modelled using investable securities on the ASX in accordance with the strategy.

Meantime, ensure that you are aware of detailed disclosures, warnings and opinions on: PRIVACY; TERMS OF USE; and USE OF HISTORICAL DATA at: https://iriskonline.com/legal/1/.