A Practitioner’s Guide to Measuring What Actually Breaks a Fund
Julian R. Sterling
These are the companion files of Financial Risk Management by Julian R. Sterling.The book on Amazon →
The four Excel workbooks that go with the book, corrected where they were wrong. Every figure the book
prints is reproduced in them by a live formula rather than a typed constant, and each workbook ends with a
Checks sheet setting the printed figure beside the computed one: 96 controls in all,
every one green. Around them: the same four models with the inputs emptied, thirteen working documents
to print, forty questions that mark themselves, and three cases the book names and never takes to a number.
Nothing is locked, protected or watermarked.
Free to download. No sign-up, no email address, nothing to fill in.
Eleven workbooks, the question book, the printable documents and the read-me. Each group below can also be
downloaded on its own. Last revised 24 September 2026.
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These carry the book’s own figures, so that every number it prints can be traced to a live
formula, and each closes on its checks sheet.
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Chapters 4, 9, 12, 13 and 14
Halverton — the four numbers, and the fifth
The four numbers the book opens with, computed on one set of inputs so the gaps between them
move when you change an assumption rather than staying where the book left them. A one-day
value at risk of 7,242,456, which is 0.862 per cent of net assets. A stress
loss of 93,277,800, which is 11.10 per cent. A cost of getting out of
5,101,785 or 2,016,532, depending on a decision nobody has written down. And a transfer of
0.8098 per unit to the investors who stay.
Then the fifth number, which is not denominated in money and therefore appears in no risk
report: what the fund can still sell inside a week. It reads 31.2 per cent before the
redemption and 8.3 per cent after the cheap way of meeting it. The impact
coefficients sit on the Inputs sheet with a switch that halves, doubles and triples them
— being wrong by a factor of three moves the answer 44 per cent, and the choice of
selling policy moves it 153. The parameter is the one everybody argues about, because it is
the one with a formula. Revised: the switch this page described is now in the workbook, a scale
beside the coefficients with the four settings side by side; tripled, the vertical slice costs
7,360,306 against 5,101,785.
Value at risk, expected shortfall and the backtest
The parametric construction worked to 7,242,456 one visible step at a time: sleeve
volatilities, the correlation grid, the quadratic form, the daily scaling and the confidence
multiplier, each on its own row. Expected shortfall sits beside it. The correlation matrix has
a switch between the reported values and the crisis values, and the diversification benefit
— 0.767 of a point of volatility, 11.5 per cent — falls to
27.6 per cent of itself when you throw it.
The horizon block scales one day to twenty by the square root of time, to 32,389,246, and puts
beside it the objection of Chapter 7: the scaling assumes you can trade, and the book
that produced this number takes eleven days on average to sell. The last sheet is the
exception counter, with the green, amber and red zones drawn at their conventional thresholds,
so a year of breaches can be typed in and read rather than argued about. Revised: the correlation
switch is now in the workbook, with both matrices computed side by side; and the zones are drawn by
the binomial rather than typed, so on 500 observations the green zone ends at 8 exceptions, not 9.
On 250 the same formulas return the published 4 and 9.
Spread duration by sleeve against a shock you set in basis points. On the book’s
calibration — 120, 450, 300 and 600 — the four sleeves lose 18,748,800, 50,274,000,
1,575,000 and 22,680,000, a total of 93,277,800, and the net asset value per
unit falls from 100.00 to 88.8955. On your calibration it totals to whatever
your calibration says.
The scenario does not stop at the mark-to-market, which is the argument of the chapter. The
financing sheet carries the repo, the haircut moving from 5 to 15 per cent, and the collateral
call of 14,860,681 that arrives on the same morning as the redemption and
competes with it for the same cash. And the reverse stress runs the engine backwards: rather
than asking what a scenario costs, it solves for the redemption the fund could not have met.
Revised: the financing sheet was only in workbook 1; it is now in this one, and met from the same
sleeve the call lowers the largest redemption the fund can meet inside a week from 31.2 per cent
of net assets to 29.2.
The liquidation engine, position by position, with the half-spread and the market impact
priced separately and the impact rising with the fraction of the sleeve you sell. The two
selling policies run side by side on the same redemption: the vertical slice costs
5,101,785 and leaves one-week liquidity untouched at 31.2 per cent;
liquid-first costs 2,016,532 and leaves 8.3 per cent.
Six successive rounds are laid out beneath, with the cumulative cost of each policy and the
liquidity remaining after each. The cheap policy stays cheap throughout — 4,753,970
against 8,292,048 over the six — and that is the finding the book had to be rewritten
around: there is no crossover. The expensive policy never catches up in money,
because what the cheap one spends is not money. The last sheets carry the queue, the
first-mover advantage of 0.2611 per unit, and the swing factor each policy implies —
2.733 per cent against 1.080 — which is the same choice seen from the board paper.
Revised: the first-mover advantage is 0.2611 per unit, not 0.0804. The queue carried the second
and third redemptions forward from the portfolio before costs, so each earlier exit’s cost
vanished from the next net asset value. The selling-policy choice of 0.4897 is still the larger,
but 1.88 times the queue, not six.
The four workbooks with their 151 inputs emptied. The checks sheets count what is still missing and test what holds for any inputs.
All chapters
Your sleeves, your scenario, your redemptions
The four numbers, value at risk and the backtest, the stress book and the liquidation engine, with the same formulas and every input emptied: the fund, the four sleeves, both correlation matrices, the spread shocks, the impact coefficients, the financing and the redemptions. The impact scale, the correlation switch and the horizon rows stay, because they are choices and the axes of tables, not data.
The book’s 151 inputs are listed in a text file inside the archive. Type them back in and the book’s figures come back with them: 7,242,456 of value at risk, 93,277,800 of stress loss, 4,753,970 against 8,292,048 over six redemptions.
Thirteen pages to print and use. A4, with margins wide enough for US Letter.
Chapters 4 to 16
Thirteen working documents
The four numbers and the fifth on one page, with Halverton’s figures beside a blank column. Value at risk one visible step at a time. The correlation memo, reported against crisis. The backtest log, with the zones for 250 and 500 observations and the lines a count leaves out. The horizon note. The three outcome levels to write down before a stress is run. The scenario calibration sheet. The financing lines and the call that lands the same morning. The reverse stress worksheet. The selling-policy decision record. The cost of the exit, sleeve by sleeve, and who pays it. The swing pricing memo and the queue. The liquidity report, after the next decision.
A workbook that marks itself. Answer in the yellow cells; the marking fills in as you go.
All parts of the book
Forty questions on the book
Seven on value at risk and correlation, six on the backtest and the horizon, seven on the stress and its financing, six on the exit and the transfer, eight on liquidity and the selling policy, and six on the three cases below. Numbers are marked to a tolerance, multiple choice to the letter, and the score sheet counts your errors part by part: that is your revision list.
Nothing is hidden. The marking sheet holds every answer, every tolerance, and the reason for each answer.
New material, not a restatement. Three situations the chapters name and never take to a number. Each case is one workbook: the note is the first sheet, the model is the rest, and a checks sheet closes it. Type your own figures in and every finding recomputes.
Chapter 7 · Case one
The horizon the book takes to sell
Chapter 7 objects that root-of-time scaling assumes you can trade, and that the book takes eleven days on average to sell. Given each sleeve its own days to sell, the value at risk is 24,029,172: the equivalent of 11.0 days, which the twenty-day 32,389,246 already covers. Sold in equal daily slices (ADDED) it is 14,978,648. Add the stressed half-spread on the whole book and the answer still reaches only 45.3 per cent of the stress loss. The horizon is not what is missing; the tail and the cost of exit are.
Chapter 6 · Case two
Five exceptions in one week
Six exceptions in 500 days, spread over two years or with five in one week (the dates are ADDED). The count test gives both a p-value of 0.66 and both are green. The independence test gives the spread pattern 0.00 and the clustered one 31.27, a p-value of 0.00000002. A working model shows five in a given week once in ten thousand million. The report should carry the largest count in any five days beside the total.
Chapters 9, 14 and 16 · Case three
The redemption after this one
Liquid-first cannot meet the fourth 10 per cent redemption inside a week: 30,889,484 of seven-day assets, 14,860,681 of them posted against the repo, against 54,436,048. The vertical slice meets all six. A floor at the next redemption plus the call (ADDED) meets all six too, for 6,795,363 over the six rounds: it keeps 42.3 per cent of the saving of liquid-first and none of its missed redemptions.
an input cell; everything else on the sheet is a formula
Black text
a formula — do not overtype these
Checks sheet
the printed figure beside the computed one, with a PASS or a FAIL; in the blank set and the cases, each control states its own verdict and the file ends ALL OK
ADDED
a figure the book does not give, used in the cases and marked wherever it appears
Why the checks matter more than the models
A workbook that agrees with a book proves nothing on its own — the author wrote both. What
the Checks sheets do is different: they force the model to reproduce a number that was printed
before the model existed, from a formula rather than from the number itself.
On this book the exercise did more than catch arithmetic. The six-round engine of workbook 4 was
built to locate the point at which the cheap selling policy becomes the expensive one — the
crossover the manuscript had asserted. There is no crossover. The chapter was rewritten around
what the model actually says, which is a harder and more useful claim: the cheap policy is
cheaper in every round, and what it spends instead is the fund’s ability to meet the next
redemption at all.
Where a printed figure depends on a convention rather than on arithmetic — the confidence
multiplier at 99 per cent, the trading-day count, the assumed severity in the stress — the
workbook shows the convention as an input rather than burying it in a formula.
Go beyond the companion files
Financial Risk Management develops the complete framework behind these models, with the assumptions, trade-offs and worked examples tied together.
The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers; the PDF
prints on A4 or US Letter. They use no macros and no add-ins, so nothing needs to be enabled or trusted. If your spreadsheet asks
to update links on opening, decline — there are none.
What changed, and when
24 Sep 2026
The four workbooks corrected, 96 checks. The first-mover advantage of workbook 4 is 0.2611 per unit, not 0.0804; on 500 observations the green zone ends at 8 exceptions, not 9; the impact scale, the correlation switch and the financing sheet this page described are now in the workbooks, with the swing factors in workbook 4. Every other figure on the page was re-verified. Added: a blank set, thirteen working documents, forty questions that mark themselves, and three cases.
How do you scale a one-day VaR to ten days?Multiply by the square root of 10, not by 10: a one-day 99% VaR of 7,242,456 becomes 22,902,656. With 0.2 daily autocorrelation it is 27,459,319.
How do you calculate expected shortfall (CVaR)?Average the losses beyond VaR. Normal 97.5% ES is 2.3378 daily sd: 7,278,117 on 840M, 1.005 x the 99% VaR. A fat-tailed history gives 1.113 x.
How do you calculate liquidity-adjusted VaR (LVaR)?Add half the bad-day bid-ask spread on every position to VaR: an 840M fund's 7,242,456 VaR becomes an LVaR of 12,139,352, and 19,283,247 when spreads widen.
Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
Credit AnalysisFour defensible EBITDAs on one borrower give leverage from 3.19x to 6.47x — and the add-back argument is fifty times the covenant headroom.
Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.
Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
Trade FinanceSix routes to payment on one 4,200,000 export order cost between 178,040 and 223,268, a spread worth 14.8 per cent of the margin, and a day of buyer credit costs 1,031.76.
Cost AccountingOne factory costed twice on the same 13,440,000 of overhead, and 4,053,091 moves between four product families.
Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.
Contract ManagementA bid 5.50 a unit cheaper, signed on paper worth 9.81 a unit more — and 94.68 per cent of it was knowable on the day of signature.
Capital MarketsFour defensible readings of one bond, the cost of an issue under each convention, and the placement discount computed at a constant discount.
Financial RegulationThree ratios pass and the fourth is in breach by 1,956.0 million: the output floor, the liquidity buffer after encumbrance, and the loan split.
Bank ManagementFour defensible readings of one balance sheet, the deposit beta measured two ways, and the liquidity that lasts 3.9 days.
The Real Estate WorkoutFour ways out of one broken loan, discounted to today, and the 58.7 cents at which a payoff beats enforcement.
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