Value at Risk, a widely used risk measure of the risk of loss on a specific portfolio of financial assets.

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7
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388 views

Calculating VaR with Monte Carlo simulation

I would like some help here :) I have a problem calculating VaR with the Monte Carlo Simulation. I have followed then next steps, is this a right way to calculate VaR or I need something more? ...
4
votes
1answer
115 views

What is the heat-map method of calculating VaR?

I'm familiar with the historical full revaluation, VcV, and Delta-gamma methods, but a client keeps talking about a heat-map method and I'm not sure what he's talking about. Any ideas?
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1answer
53 views

Parametric VaR of a portfolio including a swap

I am calcualting the parametric VaR of a portfolio that includes among other things an IRS swap that begins in the exact same day the valuation is done. Therefore, its NPV is 0 and I do not which ...
11
votes
0answers
259 views

Extreme Value Theory possible for portfolios with options?

Say you have a portfolio with long exposure to a few linear assets (stock indices) and short exposure to a nonlinear asset (say call options on one of the linear assets). I am interested in ...
7
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0answers
170 views

Imposing Restrictions on Cointegrating Vectors, R example

The code given below estimates a VEC model with 4 cointegrating vectors. It is a reproducible code, so just copy and paste into your R console (or script editor). ...
6
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0answers
154 views

Computing Value at Risk for portfolio in R

I know how to compute VaR with long positions using PerformanceAnalytics. What about a portfolio consisting in two equities A and B, 100 USD long positions in each, and 2 stock options for the same ...
6
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0answers
2k views

VaR model Unconditional Coverage Tests: Is this extension of Kupiec POF test correct?

Background: Kupiec P. in 1995, published paper "Techniques for Verifying the Accuracy of Risk Management Models" on Journal of Derivatives, v3, P73-84, it's a Unconditional Coverage Tests designe for ...
3
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0answers
386 views

VaR backtesting with overlapping time intervals

Of course the issue here is dependence: can it be removed or accounted for (in independence tests too, which of course would be troublesome)? There's a lot of literature on regression in this setting, ...
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0answers
152 views

Testing Statistical Significance of Various Portfolio Simulations

I'm trying to determine which of my portfolio simulations/backtests if any are good enough to put some money into. I outline an approach below and I'm interested in knowing: What problems are there ...
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0answers
19 views

Making apriori Statements on VaR Backtests with a Garch Modelled VaR

so I want to find out, if its possible to find out for any backtest for the Value at Risk(Kupics POF or Christophersen's Markov Test), if it is possible to make apriori Statements on Testing results ( ...
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0answers
80 views

How to fit a VAR + GARCH in R

I should create a VAR model with Garch error in R but i don't know how to do it and which package to use. The Vector Autoregressive model (or VECM) should also have covariates in it. Then I should ...
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0answers
729 views

Calculating the VaR from a GARCH(1,1) with Student-t innovations

I'm self-studying several questions on Ruey S. Tsay's teaching page. I'm experiencing some difficulty getting the correct answer for final exam 2013 Problem B Question 3. Given a Student-t GARCH ...
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0answers
411 views

Fixed Income Var calculation

I'm trying to calculate var for a portfolio of fixed income securities. I initially want to just calculate undiversified VaR for each instrument. I'm doing the following for each instrument Take ...
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0answers
15 views

Value at Risk Backtest type 2 error

I am wondering why in the most popular tests(Kupiec's POF, Christoffersen, the Null hypothesis is "our model is accurate". If we set our null hypothesis that way, we only have a decent result if we ...
0
votes
0answers
32 views

Stress Testing of the portfolio containing Equities, Bonds and Options

I have a portfolio containing equities, bonds and options for which I have calculated VAR through variance covariance matrix. No I want to calculate the stressed VAR for which I have adopted the ...
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0answers
17 views

Monte Carlo - Inflated Asset Paths Due to Correlation

I built a MC generator for 12 assets based on Brownian Motion and noticed some strange results. Formula Used S(t) = Exp(S(t-1) + (mean - (vol. / 2)) + (stdev * Normal Distribution #)) S(0) = Ln(1) ...
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0answers
23 views

VaR mapping fixed-for-floating swap

I came across a problem that asks what risk factors to map a 5 year semi annual settle fixed-for-floating swap to given it's just before the reset date. Since a FRN prices to par just before the reset ...
0
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0answers
84 views

Delta Volatility Surface Usage to value the option

I always find myself in the unknown charted territory when it comes to non-Linear Instruments. I come across the scenario, How to value the option using Delta Vol surface? Example I have CME traded ...
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0answers
45 views

Estimating Credit VaR using a simulation of joint defaults with a copula

I'm trying to follow the steps Malz gives to calculate Credit VaR using simulation of joint defaults with a copula. I'm having trouble understanding some of the steps. My math knowledge is rather ...
0
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0answers
19 views

Do I need to update the standard deviation into GARCH for the next step conditional variance predict?

I need to compare two garch models, I try to do that by Value at Risk. In general, if I have an initial conditional variance, for example, h1, then I can predict the next N days conditional variance ...
0
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0answers
82 views

Correlating random numbers seems to skew the data

First off, apologies for the cross-post from mathematics, but I found this site later and think it would be a better fit for the question (besides, there has been no comments/answers on mathematics ...
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0answers
53 views

What mean factor behind a yield?

When quoting a yield of a transaction e.g. yield 3.8% behind the yield it is quote "factor" - in this case of a yield of 3.8% it is mentioned in brackets (factor 26.11) . The lower the yield the ...