Forward Risk

If you need to estimate how much you could lose on a portfolio, this handles the standard risk toolkit: parametric VaR using variance-covariance, Monte Carlo simulation for non-normal distributions, Expected Shortfall for tail risk beyond VaR, and component/marginal VaR to see which positions contribute most to total risk. It also covers stress testing and scenario analysis with historical or hypothetical shocks. The formulas are straightforward and it walks through converting daily to multi-day horizons, decomposing risk into systematic factors versus idiosyncratic noise, and the difference between coherent measures like CVaR and plain VaR. Useful for regulatory capital calculations or just understanding your downside before things get ugly.

skills.sh installs: 733
GitHub stars: 224
last updated: Aug 21, 2026

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Install

$ npx -y skills add joellewis/finance_skills --skill forward-risk --agent claude-code

Installs into .claude/skills of the current project.

Files

Forward-Looking Risk Analysis

Core Concepts

Parametric (Variance-Covariance) VaR

Assumes returns are normally distributed. For a single asset or portfolio in dollar terms (assuming zero expected return over short horizons):

VaR = W * z_alpha * sigma_p

where:

W = portfolio value
z_alpha = z-score for confidence level (1.645 for 95%, 2.326 for 99%)
sigma_p = portfolio volatility over the relevant horizon

More generally, including expected return:

VaR_alpha = mu - z_alpha * sigma

To convert from 1-day VaR to h-day VaR (assuming i.i.d. returns):

VaR_h = VaR_1 * sqrt(h)

Portfolio VaR (Multiple Assets)

For a portfolio with weight vector w and covariance matrix Sigma:

sigma_p = sqrt(w' * Sigma * w)
VaR_p   = W * z_alpha * sqrt(w' * Sigma * w)

The covariance matrix captures both individual volatilities and correlations between assets.

Monte Carlo VaR

Simulate a large number of portfolio return scenarios (e.g., 10,000+), then take the alpha-percentile of the simulated loss distribution.

SKILL.md on GitHub

Details

Repository: github.com/joellewis/finance_skills
Categories: Frontend Development, Testing & QA, Productivity & Planning, Finance & Trading
First seen: Jun 3, 2026