# Incorporating Implied volatility in Portfolio Risk Estimation

The paper titled, “**Making Covariance-Bassd Portfolio Risk Models Sensitive to the Rate at which Markets Reflect New Information**”, makes a case against using any GARCH type of volatility estimate for portfolio risk estimation. Instead it suggests a simple way to incorporate changes in the level of implied volatility of the options in to the computation of risk of a portfolio comprising underlying securities.

The following is a brief summary of the paper :