The Riskalyze Market Assumptions allows advisors to apply a specific change to the S&P index and/or interest rate forecast to the holdings in a portfolio, allowing them to easily show prospective clients the effect that changes in the S&P and/or interest rates could have on their holdings. It also helps advisors make efficient adjustments to existing portfolios under management.
Note: Riskalyze automatically analyzes your portfolio for Beta-weighted (think equities), Interest Rate Sensitive, or Tactical, and models each holding accordingly when using the Market Assumptions Stress Test.
In This Article
- Stress Testing Changes in the S&P
- Stress Testing Changes in Interest Rates
- Best Practices for Data Model Stress Testing
Stress Testing Changes in the S&P
For changes to the S&P 500 index, Riskalyze uses beta to the S&P 500 as the core data point. Advisors can stress test their portfolios for changes in that scenario by selecting MARKET ASSUMPTIONS and entering a "Custom Scenario". Simply input the direction (+/-) and magnitude of changes to the 6-month S&P assumption and our technology models the portfolio accordingly.
Example: If you think or want to see what would happen in a flat (0%) market scenario over the next six months, enter 0% and click APPLY:
Stress Testing Changes in Interest Rates
For interest-rate changes, Riskalyze uses proprietary technology that uses the 10-Year US Government Treasury bond yield as the core data point. Advisors stress test portfolios for interest rate sensitivity by indicating the size and the direction of the yield change on the 10 Year US Government Treasury bond over the next 6 months. Simply input the direction (+/-) and magnitude of changes to the 10-Year Treasury assumption and our technology models the portfolio accordingly.
Example: If you think the 10-Year US Government Treasury bond yield will increase by 1% in the next 6 months, or want to see what would happen if it did, enter +100bps and click APPLY:
Best Practices for Market Assumptions Stress Testing
- Create duplicates of proposals (More Options (...) -> Duplicate as Draft) and give each duplicate a unique name to highlight what stress test you are performing. This will make it clear on printouts which stress test scenario is being illustrated.
- Advisors can view a visual representation of the effects of the market assumptions stress test on the underlying data scenarios by 1) selecting the Risk / Reward Heatmap view and/or 2) clicking on the security to view its Risk/Return Scenario.
Want to increase your understanding of Market Assumptions? Click HERE to access the Riskalyze Academy lesson on Market Assumptions.