# VaR using normal vol vS lognormal

We are using a vendor's software to calculate the Parametric VaR (using RiskMetrics approach) that take as input the volatility figure of the risk factors. The volatility used so far was the lognormal. But, due to negative rates (ie EUR swap), we have to switch to normal ones.

Is it OK to just replace the vol figures from the lognormal calc with the ones from the normal?

If this is the case then I would recommend you to change this and to look at the volatility in the physical and not the risk-neutral measure. This means that if your model of the return is: $$R= -D * \Delta r$$ where $$D$$ is some duration and $$\Delta r$$ is the delta of your rate then we can (under certain assumptions) assume that $$R \sim N(0,D \sigma)$$ where $$\sigma$$ is the volatility of $$\Delta r$$. Then you could estimate $$\sigma$$ from a timeseries $$(\Delta r_t)_{t=1}^n$$ using basic or more sophisticated methods. For estimating $$\sigma$$ it does not matter whether $$r_t$$ is positive or negative.