Risk Monitor System

Check your risk dashboard daily, taking 5-10 minutes each morning. During normal conditions, daily review is sufficient. During elevated A-VIX (above 25), increase to multiple checks per day. Set alerts for threshold breaches so you are notified between reviews.

When A-VIX spikes, first review your current positions and drawdown. Verify stop-losses are in place. If A-VIX exceeds your threshold (e.g., 25), consider reducing equity exposure by 25-50% depending on your risk tolerance. Do not panic-sell everything, but do act decisively.

Yes, it represents concentration risk. If that one stock drops 30%, your portfolio drops 4.5% just from that position. Consider trimming back to 10% or below. This is a disciplined way to take profits on winners while managing risk.

This depends on your risk tolerance, but 15-20% is common for moderate investors. More conservative investors might set 10%. More aggressive might accept 25%. The key is setting the limit in advance and acting before it is breached.

Simple approach: estimate daily portfolio volatility (standard deviation of daily returns) and multiply by 1.65 (for 95% confidence) or 2.33 (for 99%). For a A$100,000 portfolio with 1.5% daily volatility, 95% VaR = A$100,000 × 1.5% × 1.65 = A$2,475. Professional systems use more sophisticated methods.

Reduce beta by: selling high-beta stocks (miners, growth stocks), buying low-beta stocks (utilities, staples), adding bonds or cash, or hedging with put options or inverse ETFs. Calculate new portfolio beta after changes to verify the reduction.

Yes, but be aware correlations increase during stress. Positions that seem diversified in calm markets may all fall together in a crisis. Monitor correlations continuously, but also stress-test your portfolio assuming correlations spike to 0.8+ during a crash.

For each position, calculate days-to-exit: Position Value / Average Daily Volume. Sum across portfolio for total days to liquidate. Keep individual positions under 5 days and total portfolio under 2-3 days for adequate liquidity. Flag any positions above these thresholds.

Calculate the volatility (standard deviation) of each asset. Risk contribution = Weight × Volatility × Correlation with portfolio. Iterate weights until each position contributes equally to total risk. This often results in overweighting bonds/defensive stocks and underweighting volatile miners.

Key Australian scenarios: 2008 GFC (-50% equities, +20% bonds), 2020 COVID (-35% equities, initial bond rally then flat), China slowdown (materials -40%, banks -20%), housing crisis (banks -40%, broader market -25%), commodity crash (materials -50%). Model your specific portfolio against each.

Using IBKR API or similar: monitor A-VIX in real-time. Define thresholds (18/25/35). When thresholds breach, calculate required hedge ratio. Execute SPI 200 futures shorts or XJO put purchases. Reverse when volatility normalizes. Requires coding skills and understanding of derivatives.

Regress portfolio returns against factor returns (market, value, momentum, quality, size). The regression coefficients are your factor exposures. Multiply exposures by factor variances and covariances to get factor risk contributions. Software like Factset, Bloomberg, or custom Python analysis can perform this.