Standard Portfolio Analysis of Risk (SPAN)
- Example of scenario based method for measuring portfolio risk
- SPAN uses full valuation methods that makes it a good tool for analyzing portfolio
- including options
- Margin is set to the worst portfolio loss after considering all scenarios
- Useful when considering only two risk factors. Becomes very complex when risk factors increase.
- Ignores correlation between risk factors
- With more number of risk factors, alternative scenarios could become unmanageable