What is sigma in SAP IS-B-RA-MR - Market Risk Analysis?

SAP Term: sigma

• Component: IS-B-RA-MR

• Component Name: Market Risk Analysis

• Description: Volatility parameter in the Hull-White model that - in combination with the mean reversion - describes the time dependency of the variance.

Smart SAP Assistant

• Key Concepts: 
  Sigma is a risk measure used in the IS-B-RA-MR Market Risk Analysis component of SAP. It is a measure of the volatility of a portfolio or security, and is calculated by taking the standard deviation of the returns of the portfolio or security over a given period of time. 
  
  How to use it: 
  Sigma can be used to measure the risk associated with a portfolio or security. It can also be used to compare different portfolios or securities, as it provides an indication of how volatile they are relative to each other. 
  
  Tips & Tricks: 
  When calculating sigma, it is important to use a long enough period of time in order to get an accurate measure of volatility. Additionally, it is important to consider other factors such as correlations between different assets when calculating sigma. 
  
  Related Information: 
  Sigma is related to other risk measures such as beta and alpha. Beta measures the sensitivity of a portfolio or security to changes in the market, while alpha measures the performance of a portfolio or security relative to its benchmark.