historical-risk
Historical Risk Analysis
Purpose
Quantify how risky an investment or portfolio has been using historical return and price data. This skill covers volatility estimation (close-to-close, Parkinson, Yang-Zhang), drawdown analysis, historical Value-at-Risk, downside deviation, tracking error, and semi-variance. All measures are backward-looking and computed from observed data.
Layer
1a — Realized Risk & Performance
Direction
Retrospective
When to Use
- Understanding how risky an investment has been over a past period
- Computing historical (realized) volatility using various estimators
- Measuring drawdowns: maximum drawdown, drawdown duration, and recovery time
- Calculating historical VaR (non-parametric, directly from the return distribution)
- Computing downside deviation or semi-variance for asymmetric risk assessment
- Measuring tracking error of a portfolio relative to a benchmark
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