What are some of the key tools and best practices for managing market risk in a global market business, for example, and how have these risk metrics evolved over time?

Traditionally, risk management models are mainly based on historical observations.

That's the basic approach.

So it would be statistical analysis with different severities, which correspond to different statistical confidence interval levels.

So we would have VaR value at risk, which correspond to event that could happen few times a year.

Then stress test, which is more extreme type of shock, more severe, which would happen around once every ten years.

We call them decennial shocks.

So how do you manage correlation risk in a portfolio of businesses? Can we even think about an efficient frontier of businesses and the idea of an optimal allocation of resources among these businesses?