Quantitative statistics are useful in describing existing risk exposures, but Field Street maintains a risk management framework that outlines the firm’s typical response to market events and portfolio drawdowns.
- Stop losses;
the firm generally employs soft stop losses at the trade-, sub-portfolio-, and portfolio-level. Given the firm’s trading focus, our typical preference is to respond aggressively to losses
- Standard deviation of daily returns;
realized volatility is generally used to adjust portfolio risk exposures and identify potential regime shifts or dislocating market environments
- Liquidity profiling;
liquidity is generally a direct input into position sizing. Changes to market liquidity require additional analysis