Risk Monitoring

Effective risk management is an essential component of every investment.  Sherpa has built institutional class risk management systems using technology and principles used by leading banks, but tailored specifically to Sherpa’s investment mandates.

The Funds have strict parameters on exposure levels (overall, sector, single stock, vega, gamma, etc.).  To ensure the portfolios stay within these strict parameters, risk tests are run continually throughout the day using a scenario engine which provides the portfolio management team views of real-time exposure levels.  Risk tests include:

  • Equity exposure tests showing current net long/short position with respect to stock indices
  • Currency exposure tests showing current net long/short currency position
  • Vega tests which show volatility exposure by strike and by term
  • Theta maps which show expected decay profiles over a range of index levels
  • Stress tests which shock various market inputs and show exposure to a combination of possible market factors

Sherpa’s Chief Risk Officer has had 16 years of experience with financial derivatives and is fully independent of the trading function.