Risk metric
In the context of risk measurement, a risk metric is the concept quantified by a risk measure. When choosing a risk metric, an agent is picking an aspect of perceived risk to investigate, such as volatility or probability of default.
Risk measure and risk metric
In a general sense, a measure is a procedure for quantifying something. A metric is that which is being quantified. In other words, the method or formula to calculate a risk metric is called a risk measure.For example, in finance, the volatility of a stock might be calculated in any one of the three following ways:
- Calculate the sample standard deviation of the stock's returns over the past 30 trading days.
- Calculate the sample standard deviation of the stock's returns over the past 100 trading days.
- Calculate the implied volatility of the stock from some specified call option on the stock.
Examples
- Deaths per passenger mile
- Probability of failure
- Volatility
- Delta
- Value at risk
- Probability of default