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Risk Analyst Copilot Agent

The Risk Analyst Copilot is your dedicated risk management specialist. While operations teams focus on NAV validation and compliance, Risk Analyst Copilot continuously monitors portfolio risk metrics, performs advanced stress testing, calculates Value at Risk, enforces limit frameworks, and delivers real-time risk insights to portfolio managers and risk committees.

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Primary Role

Risk Monitoring & Portfolio Risk Analysis Risk Analyst Copilot operates as your quantitative risk officer embedded in OpsHub. It continuously calculates risk metrics, monitors exposure limits, performs stress testing across market scenarios, and surfaces risk insights that drive investment decisions—all in real-time.

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Key Capabilities

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How Risk Analyst Copilot Works

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1. Real-Time VaR Calculation

Risk Analyst Copilot automatically calculates Value at Risk using multiple methodologies on configured schedules (daily, intra-day, on-demand):

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2. Automated Stress Testing

When market conditions change or on configured schedules, Risk Analyst Copilot executes comprehensive stress scenarios:

1. Historical Scenarios - Recreate impacts from past market crises (2008 financial crisis, COVID volatility shock, 2020 equity flash crash)
2. Rate Scenarios - Model impacts of interest rate shocks (+100bp, -100bp, curve flattening, steepening)
3. Volatility Scenarios - Test portfolio under elevated volatility regimes and VIX spikes
4. Correlation Breaks - Model scenarios where historical correlations break down
5. Custom Scenarios - Risk committee-defined scenarios for fund-specific stress testing

Example: A 200bp rate shock scenario automatically tests all bond holdings for duration risk, mortgage products for convexity effects, and equity valuations for discount rate sensitivity—results delivered in seconds instead of hours of manual analysis.

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3. Continuous Limit Monitoring

Risk Analyst Copilot continuously monitors configured risk limits and immediately detects breaches: Monitored Limits Include:

• VaR Limits - Maximum acceptable 1-day, 10-day, or 1-month VaR at confidence level
• Concentration Limits - Maximum position size as % of fund NAV or by sector/geography
• Factor Exposure Limits - Maximum exposure to market factors (beta, duration, credit spread)
• Counterparty Limits - Maximum exposure per counterparty for derivatives and repo positions
• Liquidity Limits - Minimum acceptable liquidity position for market stress scenarios

When a limit is breached, Risk Analyst Copilot:

1. Alerts risk committee and portfolio managers immediately
2. Provides Context - Which limit? By how much? Which positions drive the breach?
3. Suggests Actions - Identifies positions to adjust for most efficient limit restoration
4. Escalates per escalation policies for approval and action authorization

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4. Risk Metrics Dashboard

Generate executive-ready risk dashboards with real-time metrics: Daily Risk Dashboard Includes:

• Value at Risk by fund and total portfolio (multiple methodologies compared)
• Key market factors and sensitivities
• Largest concentrations and correlation risks
• Limit monitoring status with traffic light indicators
• Market data freshness and calculation timestamps

Risk Committee Reports Includes:

• Weekly risk metrics summary with trend analysis
• Stress testing results across all configured scenarios
• Limit breach history and remediation actions
• Portfolio duration, convexity, and rate sensitivity
• Sector and geographic concentration analysis
• Peer benchmarking if external risk data available

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Real-World Use Cases

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Case 1: Pre-Market Risk Assessment

Scenario: 8:00 AM risk meeting. Portfolio managers need to understand overnight market moves and portfolio risk impacts before day begins. Without Risk Analyst Copilot:

• Manually gather overnight market data
• Recalculate VaR for new market conditions (30 minutes)
• Assess stress test impacts on portfolio
• Compile risk summary for meeting (1-2 hours)
• Risk: Missing rapid market moves, delayed decision-making

With Risk Analyst Copilot:

1. Risk meeting opens and asks: “Quick morning risk update—how did overnight markets impact our portfolio?”
2. Risk Analyst Copilot instantly pulls latest market data
3. Recalculates VaR, stress tests, and exposure limits in seconds
4. Delivers pre-meeting risk snapshot with:
   • Updated VaR with overnight market moves
   • Which positions most affected
   • Any limit breaches or concerning trends
   • Stress test results under current volatility
5. Discusses with confidence backed by real-time analysis

Result: 1-2 hour manual process compressed to instant analysis, enabling faster decision-making

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Case 2: Emergency Limit Breach Investigation

Scenario: Portfolio hits VaR limit during volatile trading day. Need immediate understanding of what happened and remediation options. Without Risk Analyst Copilot:

• Manually identify which holdings drove breach
• Analyze risk contributions manually
• Model portfolio adjustments to test scenarios
• Present options to risk committee (1-2 hours)

With Risk Analyst Copilot:

1. Limit breach detected and automatically escalated with full context
2. Risk Analyst Copilot provides immediate analysis:
   • Current VaR vs. limit (amount over and contributing factors)
   • Which positions drive the excess risk
   • Marginal risk contributions for each holding
3. Models remediation options instantly:
   • “What if we reduce position X by 50%?” → New VaR calculation
   • “What if we hedge with position Y?” → Stress test new hedge
   • “What if we apply weighting constraints?” → Optimized portfolio adjustment
4. Risk committee approves option and executes with confidence

Result: Limit breach understood and resolved in minutes, complete audit trail of analysis and decision

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Case 3: Weekly Stress Testing Report

Scenario: Weekly risk committee meeting requires comprehensive stress testing results across multiple scenarios. Without Risk Analyst Copilot:

• Manually run each scenario (historical crisis, rate scenario, volatility scenario)
• Calculate P&L impacts for each scenario
• Aggregate results into report format (4-6 hours)
• Risk: Outdated data by report time, manual calculation errors

With Risk Analyst Copilot:

1. Ask: “Generate comprehensive weekly stress test report”
2. Risk Analyst Copilot executes all configured scenarios simultaneously:
   • 2008 financial crisis scenario
   • 100bp interest rate shock up and down
   • VIX spike to 40 scenario
   • Correlation break scenario
   • Custom fund-specific scenarios
3. Generates report showing:
   • P&L impact for each scenario
   • Leverage impact under stress
   • Most vulnerable position exposures
   • Risk limit violations under stress
   • Recommended hedges for identified vulnerabilities
4. Includes trend analysis comparing to prior weeks

Result: Comprehensive stress testing delivered instantly, enabling more sophisticated risk discussions

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Database Integration

Risk Analyst Copilot has specialized access to risk-focused schemas: Write Access:

• risk.var_calculations - Daily VaR results and calculation methodology
• risk.stress_tests - Scenario stress test results and assumptions
• risk.limit_monitoring - Limit breach records and monitoring logs
• risk.risk_metrics - Daily tracking of key risk metrics

Read Access:

• investment.holdings - Current portfolio positions and valuations
• market_data.* - Market prices, volatility, correlations, rates
• risk.risk_limits - Configured limit thresholds and policy
• performance.market_factors - Historical factor data for calculations

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Tool Capabilities

VaR & Risk Calculation Tools:

• Parametric VaR with variance-covariance methodology
• Historical simulation VaR with rolling window analysis
• Monte Carlo VaR with configurable simulation count
• Incremental and marginal VaR analysis for position-level insights

Stress Testing Tools:

• Historical scenario replay (2008, COVID, other crises)
• Market factor shock modeling (rates, volatility, spreads)
• Custom scenario builder and executor
• Correlation break scenario modeling

Limit Monitoring Tools:

• Real-time limit breach detection
• Multi-tiered escalation workflows
• Limit utilization tracking and trending
• Breach history and remediation action tracking

Portfolio Analysis Tools:

• Risk factor decomposition and sensitivity analysis
• Concentration analysis by sector, geography, counterparty
• Correlation matrix analysis and break detection
• Portfolio optimization for efficient frontiers

Reporting Tools:

• Executive risk dashboards with real-time metrics
• Detailed risk analytics reports
• Stress testing summary reports
• Limit monitoring and compliance reports

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Integration with Other Agents

Risk Analyst Copilot coordinates with specialist agents to deliver comprehensive risk management:

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Best Practices

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Configure VaR Methodologies Appropriately

Select VaR methodologies matching your portfolio characteristics:

• Parametric VaR: Appropriate for normally distributed returns, fast calculation, assumes linear risk relationships
• Historical Simulation: Non-parametric, captures tail risks better, requires longer historical data
• Monte Carlo: Most flexible, can model complex derivatives and non-linear risks, computationally intensive

Many firms use multiple methodologies and compare results for robustness.

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Set Risk Limits Based on Strategy

Work with portfolio managers and risk committee to set limits reflecting investment strategy:

• Conservative Funds: Tighter VaR limits (0.25-0.50% of NAV)
• Balanced Funds: Moderate limits (0.50-1.00% of NAV)
• Aggressive Funds: Higher limits (1.00-2.00% of NAV)
• Alternative Strategies: Custom limits based on strategy-specific risks

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Review Stress Scenarios Quarterly

Keep stress scenarios relevant to current market environment:

• Add New Scenarios for emerging risks (geopolitical tensions, monetary policy shifts)
• Remove Old Scenarios for resolved historical risks
• Calibrate Shock Magnitudes to reflect current volatility and correlation regimes
• Test Hedge Effectiveness under proposed stress scenarios

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Monitor VaR Model Backtesting

Track how often actual losses exceed VaR estimates:

• Expected Exceedances: For 95% VaR with 252 trading days/year, expect ~13 days of exceedance
• Monitor Trend: If exceedances increase significantly, model may need recalibration
• Document Changes: Log all model updates and recalibrations in audit trail

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Common Questions

Q: Which VaR methodology should we use? A: Start with parametric VaR for simplicity, but compare to historical simulation to understand tail risk differences. Many sophisticated investors use multiple methodologies and understand the strengths/weaknesses of each. Q: How often should we recalculate VaR? A: Daily at minimum for actively managed portfolios. Intra-day VaR is appropriate for leveraged or derivatives-heavy portfolios. Risk Analyst Copilot supports both. Q: What stress scenarios should we run? A: Start with historical crises relevant to your portfolio. Add scenario pairs (rate up/down, volatility up/down) for factor sensitivities. Include custom scenarios reflecting portfolio-specific risks (e.g., credit spread widening for credit-heavy funds). Q: Can Risk Analyst Copilot recommend portfolio adjustments? A: Risk Analyst Copilot provides analytical support (marginal risk contributions, stress results, limit utilization) to inform decisions, but portfolio managers make adjustment decisions. The agent can model “what-if” scenarios instantly to support the decision-making process. Q: How does Risk Analyst Copilot handle non-linear risks? A: Through Monte Carlo VaR, stress testing of non-linear derivatives, and explicit delta/gamma/vega calculation for option positions. For complex derivatives, stress testing provides more realistic risk insights than parametric VaR.

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Getting Started

1. Define Risk Framework: Work with risk committee to establish VaR methodology, confidence level, and time horizon
2. Configure Risk Limits: Set VaR, concentration, and factor exposure limits for each fund structure
3. Build Stress Scenarios: Define historical crisis scenarios and factor shock scenarios relevant to portfolio
4. Schedule Calculations: Configure daily VaR calculations, weekly stress tests, and real-time limit monitoring
5. Set Up Escalations: Define who receives alerts for limit breaches and approval workflows

Ready to transform risk management into real-time decision support?

Start Using Risk Analyst Copilot

Learn how to leverage Risk Analyst Copilot in your OpsHub workspace

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