Market Factors

	Asset 1	Asset 2

Risk Factor Analysis 2

For daily price changes, a factor of 0.94 is usually applied.
0.97 applies to monthly data
A decay factor (Lambda) of 1 disables the weighting scheme.
Note: BIS regulatory reports assume a Decay Factor of 1.0

The Cutoff defines the percent of volatility precision that we accept to forgo by dropping part of the returns
Notice the difference between statistics computed with and without cutoff below

The Quantile Vs Cumulative Density of Returns plots the cumulative density against the probabilities of reaching these return

The Histogram of Returns displays the number of returns that fall within a given bucket or bin

The first four moments of returns are the Mean, standard deviation skewness and kurtosis respectively.Provided there are enough samples, Moments characterize the distribution of returns.