The RiskMetrics 2006 Methodology

RiskMetrics Methodologies--The Standard for Financial Risk Management

Since the publication of the RiskMetrics Methodology in 1994, RiskMetrics Group research has set the standard for financial risk management, defining the way risk is measured and managed.

The original (open-source) RiskMetrics Methodology has been proven and time tested in an everchanging financial market as the foundation of risk measurement, and is widely recognized by risk practitioners and regulators as the language of risk. With the benefit of more sophisticated knowledge of financial data, RiskMetrics Group has completely revisited the foundations of its risk framework and is pleased to introduce RiskMetrics 2006.

A New and Enhanced Methodology

Building upon the strengths of the original RiskMetrics Methodology, RiskMetrics 2006 (RM2006):

• Measures risk across a broad range of risk horizons
• Is effective for both absolute and relative risk analysis
• Increases accuracy of risk evaluations
• Is robust, having been extensively back-tested, especially for long-term horizons
• Is applicable across a wide range of assets
• Can be consistently and quickly implemented by market risk practitioners

The Main Components of RM2006