How to validate value-at-risk calculation on an equity portfolio using equity sensitivities? I don't have trouble doing that for rates instruments or options but I don't know which underlying risk factor can we use on an equity to compute sensitivities.
Well, you can either come up with a model that provides shocks on individual equities and then directly use them. Or you can come up with a model that provides shocks on a few risk factors and the you have to determine the sensitivity (beta) of the individual equities towards your common risk factor (which can be a market index or a financial index). From here it's of course possible to go crazy by making less strong assumptions regarding functional behavior.