I would like to calculate the Conditional Value at Risk for a portfolio. To be honest, I'm trying for a few days to find an example to calculate for an entire portfolio, not just for one security and I really have a hard time understanding. All the examples are for a single security. I need to add that I'm at the beginning of learning econometrics/statistics.
Let's say that I have a portfolio composed from 3 investments. If I want to calculate CVaR using Monte Carlo prices from the 3 investments, here is what I'm thinking: 1. create a simulated portfolio of 3 investments and take into the account the nominal value of every security and the direction (long/short). 2. run the above portfolio through Monte Carlo for n times and generate a distribution of P/L by calculating the difference between start and end of NAV for every MC iteration. 3. let's say I want to calculate at 99% confidence ratio. Then I get the mean of 1% of the worst losses resulted from the Monte Carlo distribution.
I would like to emphasize that I don't want to use a normal distribution.
Are the steps above correct for finding the CVaR of a portfolio? Also, does respect the coherent risk measure? Thank you.