Riskdata, the leading developer of risk management solutions, in close collaboration with Hedge Fund Research Inc., a provider of hedge fund performance data and indices, is starting day-to-day publication of Value-at-Risk (VaR) indicators for the global hedge fund industry. The aim of this disclosure is to provide in-depth insight into the levels of risks in the hedge fund industry, thereby increasing overall market transparency and restoring rationality to investor confidence. Riskdata and Hedge Fund Research Inc. believe that publishing VaR indicators can help investors to discern and separate real from imaginary investment threats.
“In the ongoing market crisis, when uncertainty rules the day, maximum insight into the relative risks of various instruments becomes a key for achieving selectivity in redemptions and investment decisions,” said Ingmar Adlerberg, Riskdata ceo.“The goal of the Riskdata and Hedge Fund Research Inc. collaboration is to help investors better analyze their portfolios in the current market crisis.”
To facilitate the understanding of risk level fluctuations across the globalized market and asset classes, Riskdata provides global indicators of two risk measures – VaR and ShockVaR. Both estimates are the result of the full overnight revaluation Monte-Carlo simulation. Unlike more traditional VaR measurements, ShockVar indicates the possible over- or under- estimate of risk during periods of extreme market stress. According to Adlerberg, ShockVaR is more reactive than long-term VaR and can increase by a factor of two within a few days following a shock or anticipating a shock. Similarly, it rapidly falls back to its initial value if the market volatility returns to long-term levels. Riskdata uses its own proprietary methodology to determine ShockVaR.
Hedge Fund Research Inc. publishes daily the HFRX indices, which provide returns from eight different strategies representing the entire industry. Riskdata relies on its unique technology – known as RiskTicker – to calculate Shock and long term VaR for HFRX.
"HFR is pleased to collaborate with Riskdata in improving transparency in the market and instilling confidence amongst investors," said Hedge Fund Research Inc. president Kenneth J. Heinz.
Riskdata information comprises One-Day Shock VaR, One-Day Long Term VaR and their ratio which is an estimate of the level of abnormality in instrument risk. Value-at-Risk (VaR) is the measure of risk for assessing capital adequacy requirements to market operators.