The risk statistics available within Aegis do not end with this basic VaR number. In Figures 2 and 3 we see the total risk decomposed into its common factor and specific components. This multifactor modeling approach is unique in allowing a breakdown of this risk along intuitive and understandable dimensions. The Trading Style factors show much less impact, at 72 basis points of risk. Having looked at the broad-based total risk decomposition, the trader can now drill down further and identify exactly which industry or trading style plays are adding to or detracting from this risk.
Further inspection reveals the individual names that contribute most and least to position risk.
In Figure 4 we see that Highland Distilleries contributes least to portfolio risk, and Barratt Development contributes most to portfolio risk. The identification of the assets that contribute most and least to portfolio risk also allows the trader to sequence trades so that the risk of the aggregate position is minimized. The powerful Aegis Trade Scenario feature allows the trader to see the potential impact on position risk of asset swaps. Let's assume that in order to minimize the position risk of our example book we wish to trade Highland Distilleries with Barratt Development. The Aegis Best Hedge tool allows market makers, traders running proprietary books, and risk managers to offset the market component of the total risk they are bearing.