Stack Exchange Network

Stack Exchange network consists of 174 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.

Visit Stack Exchange

Questions tagged [value-at-risk]

The tag has no usage guidance.

1
vote
1answer
51 views

Computing Montecarlo VaR for a single asset

I'm trying to understand the procedure to compute the Value-at-Risk for a single asset by implementing the Montecarlo technique. Here it follows the procedure step-by-step in 5 points: selecting the ...
0
votes
1answer
41 views

Variance-Covariance VaR: how to get the volatility?

Because the variance-covariance VaR assumes that the returns are normally distributed, in theory it is easy to get VaR by simply finding the mean and the volatility (standard deviation) of the ...
0
votes
1answer
27 views

Delta-Gamma VaR question on inputs (do I need only one delta or the delta for the past 500 days?)

When calculating a VaR using the Delta-Gamma approach, I am supposed to use this formula: ∆(V) = Delta * ∆(X) + 0.5 * Gamma * ∆(X)² where: ∆(V) = change in value of the asset in portfolio ∆(X) = ...
-1
votes
1answer
37 views

Calculating Value-at-Risk for difference between two assets / series

I'm working on a 'portfolio' comprised of, say, £100 long in Asset A and £200 short in Asset B. In reality it is a holding in A and an obligation to pay B (think a retirement plan with a single pool ...
0
votes
2answers
58 views

Procedures to follow when VaR model fails backtest

I was wondering what the correct procedure is to follow when a VaR model fails a backtest (either conditional coverage and/or independence tests)? Assuming I am restricted to using a historical VaR ...
2
votes
2answers
57 views

How to prove the following relation of Conditional Value-at-Risk and Value-at-Risk?

How to prove the following relation of Conditional Value-at-Risk $\text{CVaR}_{\alpha}(X)$ and Value-at-Risk $\text{VaR}_{\alpha}(X)$, \begin{equation} \text{CVaR}_{\alpha}(X) = \text{VaR}_{\alpha}(X)+...
1
vote
0answers
49 views

Pricing default risk in cryptos

I'm looking to figure out how to price "insurance" against a counter-party defaulting in an OTC cryptocurrency transaction. I think the first measure would be to calculate VaR? I'm planning on ...
1
vote
1answer
51 views

Value at Risk for normal r.v. with shock (regimes)

I am struggling to understand how was this simple Value-at-Risk calculated. It's Example 1 in Daníelsson, Jón, et al. "Fat tails, VaR and subadditivity." Journal of econometrics 172.2 (2013): 283-291 (...
0
votes
0answers
32 views

References for Risk Adjusted Portfolio Optimization

I'm trying to formulate BL portfolios which use Mean VaR, Mean CVaR optimization to calculate risk-adjusted equilibrium returns. Can someone point me to any references on this topic? I'm looking for ...
0
votes
1answer
80 views

How to calculate $\frac{\partial\ \text{CVaR}_{\alpha}(\min(X,d))}{\partial d}$ and $\frac{\partial\ \text{VaR}_{\alpha}(\min(X,d))}{\partial d}$?

How to calculate $\frac{\partial\ \text{CVaR}_{\alpha}(\min(X,d))}{\partial d}$ and $\frac{\partial\ \text{VaR}_{\alpha}(\min(X,d))}{\partial d}$? Here, $\text{CVaR}$ is short for Conditional Value-...
1
vote
1answer
103 views

How to compute a single Value-at-Risk (a single quantile) of portfolio returns taking into account correlation between individual returns?

Introduction My goal is to retrieve a single Value-at-Risk (VaR) of a N(0, H) random variable $X$ at the $\alpha \in (0,1)$ confidence level where H is a known d-dimensional positive definite matrix ...
0
votes
0answers
24 views

Hedger's utility function associated with minimizing value at risk

What must be the general shape of a hedger's utility function if the hedger is minimizing value at risk? What is a simple example of such a utility function?
0
votes
0answers
31 views

Does it make sense to simulate from the multidimensional GBM?

Suppose I have times series data on 3 assets and I do $N$ simulations (GBM) first for each of assets individually and then from a multidimensional GBM since their log-returns are correlated (I use ...
2
votes
1answer
101 views

Volatility scenario generation for value-at-risk

I have the following problem: For a single name plain vanilla equity option calculate 1y VaR for given confidence level. Is there any state-of-the-art or current market practice known on how to ...
1
vote
1answer
97 views

Negative VaR equivalent Volatility (VEV) and its meaning?

Can a VaR equivalent Volatility (VEV) as defined by KID/PRIIPS law be negative and what does it mean if it has a negative value?
1
vote
1answer
46 views

What is the relationship of Value-at-Risk of a random variable $X$ and a constant $D$ $VaR_{\alpha}(min(X,D))$and $VaR_{\alpha}(X)$?

Suppose $X$ is a nonnegative random variable and $D$ is a constant, what is the relationship of $\text{VaR}_{\alpha}(min(X,D))$ and $VaR_{\alpha}(X)$? Here, $VaR$ stands for Value-at-Risk as, $$ VaR_{\...
2
votes
1answer
60 views

Value at Risk for a plain vanilla interest rate swap

Hello I have question regarding the computations of the Value at Risk for a plain vanilla interest rate swap (i.e. same currency and fixed-for-floating). I have a data set consisting of the Swap ...
1
vote
1answer
64 views

Value-at-Risk and dividend payments

How should dividends be considered when computing Value-at-Risk for a stock portfolio using Historic data. To simplify let's consider a very simple portfolio of one long position on a stock. My VaR ...
0
votes
0answers
18 views

Difference between Standard VaR and VaR with partial set of Risk Factors

Ciao, I'm working on VaR and Expected Shortfall and this question came out. For a given portfolio VaR can be computed w.r.t. all the risk factors or just for a subset. Infact you can decide to 'freeze'...
0
votes
0answers
100 views

Delta- Gamma approximations for VaR

I was reading Delta- Gamma approximations for VaR from Phillipe Jorion-Value at Risk 3rd edition, I got stuck here, how do they derive equation $10.10$ from $10.9$. Also in eq. $10.9$ they have ...
0
votes
0answers
16 views

Definition of μ in Parametric Absolute Ex-Ante Risk

Parametric Value at Risk (of an investment fund) depends on the Gaussian Distribution and comes in two forms; Relative VaR (ie relative to the mean) and Absolute VaR. Both are calculated as ...
1
vote
1answer
88 views

VaR of long options

I just had a chat with a risk manager who thinks that the daily VaR of a long option with a maturity under three months should be 'Premium of the Option' / 20 (assuming twenty days in a month) ...
1
vote
0answers
41 views

How can I find what Loss Given Default to use

I want to come up with the appropriate loss given default for a commodity derivative in my CVA calculation. would anyone know where I can find this information?
0
votes
0answers
15 views

Do they apply any weights to asset PnLs before arriving at Pflio PnL in HVaR Computation?

My current understanding is; Eg: If you have 2 assets in your pflio 1.the assets are mapped to risk factors. 2.Historical Shocks are applied to risk factors and the assets are valued again. 3....
1
vote
1answer
111 views

What is the name of this VaR calculation strategy?

Here's a question on a passage from this paper I'm reading. Here's the quote: Given the vector of portfolio weights $w$, and the estimate of the conditional variance, $\Sigma_{t,k}$, the ...
1
vote
1answer
113 views

Risk Management methods for Stock portfolio with ~30 stocks

What is ideal Risk Management method/methods s for stock portfolios with 25-30 stocks and around 50.000 USD invested in those stocks. Every stock bought will be kept in the portfolio for 1 to 12 ...
1
vote
2answers
89 views

Assigning Global VaR to portfolio members

Assuming that I calculate a parametric VaR of a portfolio with 3 assets, and I need to assign the amount each asset (equity) contributes to the VaR. Lets say that: $C$: Is the correlation matrix $w$:...
0
votes
0answers
30 views

Choosing the DoF for a t-copula when copulafit doesn't work

I'm currently writing my Master thesis where I investigate some different methods of dimension reduction regarding Value at Risk for very large equity portfolios. My current data set contains of 5000 ...
0
votes
1answer
76 views

Calculating Value at Risk (VaR) of a Stock position assuming geomtric brownian motion (GBM)

I want to calculate the VaR for a long position (S) in stockprices after one year. Therefore i tried two methods: analytical solution: $VaR = S\cdot p_0\cdot \sigma_d \cdot \Phi^{-1}(1-\alpha)\cdot \...
2
votes
0answers
41 views

VaR decomposition of non-normal portfolio by g-and-h distribution

According to Doowoo Nam (2013), VaR of non-normal portfolio returns approximated by g-and-h distribution can be decomposed pretty much in the same way as the VaR of a portfolio with normal returns. ...
0
votes
0answers
79 views

Backtesting VaR

I just started reading about Value at Risk and there were a few questions that were brought to me as I was fiddling with it in R. Suppose my time series that is ...
2
votes
1answer
158 views

Intuitive explanation for expectiles

I am looking for an intuitive explanation for expectiles. Here is a link to a paper about expectiles: Bellini and Di Bernardino: Risk Management with Expectiles, European Journal of Finance, May ...
3
votes
1answer
165 views

Can portfolio Value-at-Risk be calculated analytically for multivariate t-distributed returns?

It is widely known that VaR is generally not sub-additive in all but the most restrictive cases (typically when a Gaussian return distribution is assumed, which fails when it matters the most). ...
4
votes
1answer
129 views

Risk Compensation

I try to understand the different ways to compensate for risk. In the CAPM, when we plot the excess return against the risk, we find that portfolios of interest lie on the efficient frontier (i.e. ...
1
vote
0answers
65 views

Calculate VaR using the extreme value theory

I am trying to calculate the Value at Risk for different models. But I am now confused for some reason. Could you please help me? I calculate the 1% and 5% VaR (so negative numbers) and I am also ...
0
votes
1answer
61 views

Calculate standard deviation from the value at risk

I have the following data: VaR VaR% Expected return Am I right to think that I would be able to derive standard deviation from this? Using the formula: VaR%= ER-(zscore*SD), I should be able to ...
1
vote
1answer
378 views

Ratio between Expected Shortfall and Value at Risk for $t$-distribution

If $X$ is a random variable with $t$-distribution of parameter $\mathcal{v}$, how can I prove that $$ \lim_{\alpha \to 1^{-}} \frac{\mathrm{ES}_{\alpha}(X)}{\mathrm{VaR}_{\alpha}(X)} = \frac{\mathcal{...
0
votes
1answer
66 views

What's the relationship between $VaR_{\alpha}(X)$ and $VaR_{1-\alpha}(X)$ if the probability distribution function is not symmetric?

If the probability distribution function $f(x)$ is not symmetric, is there any relationship between $VaR_{\alpha}(X)$ and $VaR_{1-\alpha}(X)$? Here, $VaR$ is defined as $$ VaR_{\alpha}(X) := \inf\...
1
vote
1answer
378 views

VaR : Student-t GARCH

I have a question on the VaR estimation via the student t GARCH model. Under this framework, the one day ahead VaR estimate is calculated by the following formula: $$VaR_{p}=\mu_{t+1}+\sigma_{t+1}\...
1
vote
1answer
149 views

Questions abut VaR and CVaR. Is there any relation between $VaR_{\alpha}(X)$ and $VaR_{\alpha}(-X)$, or $CVaR_{\alpha}(X)$ and $CVaR_{\alpha}(-X)$?

I have some questions when dealing with Value-at-Risk (VaR) and Conditional Value-at-Risk (CVaR). Is there any relationship between $VaR_{\alpha}(X)$ and $VaR_{\alpha}(- X)$, or $CVaR_{\alpha}(X)$ ...
0
votes
1answer
122 views

VaR Backtesting. High frequency of exceedances

I'm preparing for thesis defense and I've got simple question connected with Value at Risk backtesting. Portfolio VaR was calculated using historical simulation approach (250 days and 500days) and ...
4
votes
1answer
286 views

Confidence Interval on Monte-Carlo-CVaR

I use the Monte-Carlo Simulation for the computation of VaR and CVaR and wish to compute the 95% Confidence Interval of my result(not the confidence level of VaR). In the case of VaR this is simple ...
0
votes
1answer
416 views

Backtesting Value at Risk. With kupiec test

I have a certain problem with backtesting calculated earlier Value at Risk. I've got calculated daily VaR with historical simulation method for stocks. I've used two values of alpha 0.05 and 0.1. Now,...
1
vote
1answer
95 views

testing stressed VaR

How can you compare stressed VaR estimates? What are statistical tests for assessing the quality of stressed VaR estimates? I think the VaR Coverage test for example by Christoffersen (1988) would ...
3
votes
1answer
258 views

Why do regulators assume a risk-neutral world?

It is clear that when pricing derivatives we do this in the risk-neutral measure for known reasons. In the calculation of the VaR equivalent Volatility (VEV) in the KID-SRRI calculation (see page 9 ...
4
votes
2answers
736 views

non-subadditivity of VaR

I have been reading up on VaR and get very confused by the subadditivity concept. On wikipedia, it says "VaR is not subadditive: VaR of a combined portfolio can be larger than the sum of the VaRs ...
1
vote
1answer
83 views

Integrating Credit and Market VaR

For a portfolio of fixed income, is there a framework or model for providing a VaR-type estimate that takes into account not only market risk factors, but also the loss associated with the probability ...
2
votes
1answer
504 views

Gaussian vs Student Copula applied to finance

I would like to get your opinion on the following topic: I am comparing the behaviour of Gaussian and Student-t Copulas. I employ the follwing procedure: Simulate N=100,000 samples from a Student ...
3
votes
2answers
177 views

Value at Risk - What if an account has never suffered from a negative return

I want to implement an algorithm that calculates an account's 95% value at risk on a monthly return base. The case I want to describe in this question is rather academic and will probably never happen ...
2
votes
1answer
127 views

Energy Risk Quant--Any discussion boards for energy related quant topics?

Any discussion boards for energy related quant topics? Like VaR in energy portfolio, and pipeline option pricing.. just want to know where is the best discussion board for such energy specific topics. ...