The Gottlieb Risk Factor acts as a proxy for potential risk in the stock price over the next 30 calendar days. Included in the calculation is:
1. Stock movement today.
2. Stock returns over the last 3-months.
3. The 30-day implied volatility from the option market (definition below).
4. The realized stock volatility over the last 20-trading days (i.e. HV20).
5. The history of the 30-day implied volatility over the last year.
Using the 30-day implied volatility from the option market we can price the expected stock price range for a one standard deviation move. In English, the option market reflects a "mathematical guess" of the stock price range in the next 30-days.
If you think the stock will be outside this range, then you believe the option market is underpricing risk (options are too cheap). If you believe the stock will be inside this range, then you think the option market is overpricing risk (options are expensive). If the range seems "about" right, then you agree with the option market pricing.
About the Creator of the Star and Risk Factor Rating
Ophir Gottlieb is the CEO & Co-founder of Capital Market Laboratories. He is the sole inventor of the Forensic Alpha Model (FAM) and a co-inventor of Accounting and Governance Risk Model (along with CML's Chief Information Officer, Tom White). Both quant model's are now owned by MSCI. FAM has been a celebrated achievement in artificial intelligence and quantitative finance that was introduced to world by the Rotman International Journal upon its completion.
While the commercial FAM model is now owned by MSCI, the core methodological approach was endorsed by the head of artificial intelligence for the state of Germany as a novel application of advanced machine learning in quantitative finance. FAM and AGR are used by asset managers worldwide with over $1 trillion of assets under management. The FAM model has made Mr. Gottlieb one of the most recognized names in all of quantitative finance.
Mr Gottlieb's mathematics, measure theory and machine learning background stems from his graduate work at Stanford University. He is a former option market maker on the NYSE and CBOE exchange floors and has been cited by dozens of various financial media including Reuters, Bloomberg and the Wall St. Journal.
THE GOTTLIEB RISK FACTOR AND THE CML STAR RATING ARE NOT A RECOMMENDATION TO BUY, SELL, OR HOLD ANY SECURITY. Rather, the Star Rating is a measure of the fundamental condition of the Company, which is a key factor in the valuation process, and the Risk factor is a measure of potential stock price movement (in either direction) over the next 30-days using the option market and prior stock price movement as a guide.
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories ('The Company') does not engage in rendering any legal or professional services by placing these general informational materials on this website.
The Company specifically disclaims any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.
The Company make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that The Company endorses, sponsors, promotes or is affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.