Analyzing Volatility, a Cognity Case Study: Assessment of 2008 VIX Short

Posted by Erika Alter, Global Head of Commercial Strategy, BISAM on Dec 7, 2016 8:30:00 AM
Find me on:

Last week, in response to a recent story in the Financial Times,TM we published The VIX, Volatility and Market Risk. In that post, we outlined the BISAM Cognity approach to modeling risk, explaining that our "real world" risk models do not assume risk equals volatility, but rather that turbulence (vol of vol),  deviation from normality and "tail-fatness" are the lenses through which market risk should also be measured. 

To this point, and as a follow up to last week's post, I'm pleased to share this Cognity backtest from our archives, which looks at a set of long and short call "what if" scenarios on the VIX in September 2008.

Click through the following case study for a deep dive into the what-if scenarios and backtest results and see how a Portfolio Manager only looking through the lens of Normal VaR measures in this scenario would have failed to see a major risk contributor (potential -30+% loss in portfolio performance by shorting the VIX) and a major risk diversifier (+40% increase in portfolio performance by taking a long position).  


Cognity.pngPortfolio analytics based on normal distributions do not provide the insight needed for sound what-if decisions. BISAM's patented Cognity models uncover new opportunities and upside potential. Visit to learn more about our Real World Risk Modeling capabilities and request a Cognity demo today.

Visit our Cognity page


Topics: Daily Risk Statistics, Risk Management

Leave a Comment

If you have any comments or have any questions about the subjects raised in this post, please fill in your details and message below. We'd like to hear from you.