Cash flow at risk

The cash flow at risk is a statistically determined key figure for risk assessment. It only differs from value at risk in terms of cash flow .

To calculate the cash flow at risk , the cash flows must first be decomposed. As factors determining cash flow, the concept is based on sales , cost of goods sold , marketing and administration expenses, tax expenses and financial expenses. Plan or actual values ​​must be specified for them. The standard deviation and the correlation coefficients are to be evaluated for the factors mentioned . Historical data can hardly be used here. No solid data series are available due to a dynamic environment that is accompanied by a constantly changing risk landscape. Estimating the correlations is very difficult and costly when there are a large number of influencing variables. The next step is to generate random numbers for each risk factor. This is done using the variance - covariance method and the Cholesky decomposition . A Monte Carlo simulation is carried out on this basis , which is used to generate a probability distribution. Finally, the cash flow at risk can be determined for individual security levels using the distribution function.