Portfolio RiskClass Exposure Analysis

RiskManagers want to check whether losing portfolio is exposed more to a particular RiskClass than profitting portfolio. This is helpful in finding which are the riskier riskclasses.

What is the need to find riskier classes?
      This helps to hedge properly, buy insurance,..etc

How to find the riskier classes?

           Use Odds Ratio= Odds of Loss portfolio being exposed to riskclass   
                                       Odds of  Profit portfolio being exposed to riskclass

Program:-

DATA RiskClassExposure;
 INPUT OUTCOME $ EXPOSURE $ PORTFOLIOCOUNT; 
DATALINES;
LOSS   1-YES  50   
LOSS   2-NO  100  
PROFIT 1-YES  20   
PROFIT 2-NO  130  
;

PROC FREQ DATA=RiskClassExposure;
  Title 'Program to compute an Odds Ratio1';
  TABLES EXPOSURE*OUTCOME/CHISQ CMH;
  WEIGHT PORTFOLIOCOUNT;
RUN;

Result:-

Two important stats here :-

  1) Not by Chance (chi-square prob<0.0001) it has real impact.

Statistics for Table of EXPOSURE by OUTCOME

Statistic	DF	Value	Prob
Chi-Square	1	16.7702	<.0001

  2) Odds Ratio 3.25 at Confidence Interval of 1.8189 to 5.87.

Common Odds Ratio and Relative Risks
Statistic	Method	Value	95% Confidence Limits
Odds Ratio	Mantel-Haenszel	3.2500	1.8189	5.8070
	Logit	3.2500	1.8189	5.8070