One method of illustrating risk is to show the value at risk (VaR). Plotting the fifth percentile from the simulated outputs in the left chart, this data point can be construed as the VaR with a 95% confidence level. The right-hand chart focuses on all results below the fifth percentile. The horizontal bar in each box indicates the mean of these data points, which is the conditional VaR.
This chart explains how bad it can be under the four scenarios/portfolios. It supports an informed decision and an understanding of the risks involved when investing in these portfolios.
Does this chart add value?
What insights can be extracted from it?
What would you use to convey the risk in the portfolios?
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