0
$\begingroup$

I would like to use the approach outlined here to calculate portfolio VaR.

However in my case the portfolio also contains ETFs (where I don't necessarily know the fund's total composition. I usually have the top 10). Can I still apply the Monte-Carlo method? If yes how should I modelize the ETF?

$\endgroup$
  • $\begingroup$ You can still use Monte Carlo if you think that this is the best way to capture the risk of stock and stock-like instruments. I would be careful on the assumptions of the distribution however $\endgroup$ – SolitonK Feb 2 '17 at 8:22
2
$\begingroup$

you don't have to model the constituents of the ETF individually. You can consider it as a single asset and model it like any other stock in the portfolio. for example If you would have an index future, then I would also not model the constituents but just model the future as a single instrument.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

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