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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?

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  • $\begingroup$ 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, 2017 at 8:22

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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.

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