Evaluating Portfolio Risk with VaR

Maria is a portfolio manager at an investment firm. She is tasked with assessing the risk profile of her firm's diversified investment portfolio, which holds a mix of stocks, bonds, and alternative assets. To quantify the risk associated with the portfolio, Maria decides to use the Value at Risk (VaR) approach, aimed at determining the potential loss in value of the portfolio over a given time period under normal market conditions.

While preparing her analysis, Maria considers several metrics for measuring risk and how they could help in evaluating different aspects of the portfolio's performance and risk exposure. Understanding the principles of each metric is crucial for effective risk management.