0
$\begingroup$

I am not a quant geek.I always have doubt what should be the VaR output for portfolio contains long and short of the same maturity @ same traded price. e.g. CME corn future of sept expiry

Groundwork

I was using the full revaluation with PnL approach at 95 percentile. The output was coming as zero.

$\endgroup$
1
  • $\begingroup$ Are both positions (long&short) for exactly the same instrument? $\endgroup$
    – Nicholas
    Mar 19, 2016 at 20:40

2 Answers 2

1
$\begingroup$

If your portfolio has both long and short position, it means it is completely hedge. Under such scenario, VaR would become zero, as there is no risk involve in portfolio.

$\endgroup$
1
$\begingroup$

VaR is a method for simulating value of your future portfolio. If your portfolio is always zero, this is like not investing anything. Thus, there's no risk and VaR must always be zero.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.