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Risk Management

Market Risk

The most common method of monitoring market risk is value-at-risk (VaR), which is used to estimate maximum potential losses within a specific confidence level.

Evercore Casa de Bolsa uses a 98% confidence level and a one-day time horizon.

This means, for example, that if the one-day VaR is $2,000, the probability of losses exceeding $2,000 over the next 24 hours due to fluctuations in interest rates is 2%.

Two methods are used to estimate value-at-risk:

  • Historical simulation, which is used for the daily risk report.
  • The Monte Carlo simulation, which is used for weekly, monthly, and quarterly reports.