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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.
  • Drawback:
  • Ignores correlation between risk factors
  • With more number of risk factors, alternative scenarios could become unmanageable

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