Questions tagged [value-at-risk]
Value-at-Risk is a family of measures used to help the owner of a position to assess its "worst case value".
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Expected loss of investment over 30 years
Let $V_{30}$ denote the value of my portfolio after 30 years. Each year, I add 1000\$ and rebalance my portfolio such that invest $c_1$ in a risky asset and $c_2$ in a risk-free bond. Denote the ...
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How to calculate VaR given mean and sd?
Sarah manages a hedge fund with a portfolio valued at \$2,000,000. The portfolio's daily returns have a standard deviation of \$3,000 and an average daily return of \$1,200. Calculate the five-day VAR ...
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Dimension reduction of par risk strips
I saw some threads about reducing dimensionality of IR risk strips, e.g. PCA and risk bucketing.
However, I did not find a satisfying answer to that yet. Therefore, I decided to formulate a similar ...
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Value at Risk for Portfolio of Futures
I'm working in a very small commodity trading company. They are not used to excel at all, so i built their trading sheet to follow open positions & past positions.
Now they asked me to calculate ...
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Portfolio risk of correlated assets using Mahalanobis distance
I am trying to understand if there is an agreed methodology to measure the total risk in a portfolio of correlated assets.
I am taking a simple model of stock prices following geometric Brownian ...
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Reference on RNiV (Risk not in VaR) estimation
I am looking for some good materials to understand the calculation methodologies, regulatory requirements etc. on RNiV.
I am particularly interested on following ...
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Can Heston volatility model be used to calculate VaR or CVaR?
I'm just a beginner and third-year statistics major student. Based on what I read in some journal, most common model that used to calculate VaR or CVAR is GARCH. Is there any possibility that I can ...
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Method for using Historical Simulation method on an Instrument priced using Monte Carlo
I was speaking to a very esteemed professional in Financial Risk and he mentioned that he always prefers to use Historical Simulation as the method for his VaR even if he prices his Exotic derivatives ...
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CoVaR/dCoVaR modelling using bivariate DCC-GJR-GARCH
For the several weeks, I have been looking for a way to calculate and display the results of my DCC-GJR-GARCH model to picture a dynamic relationship between daily return of, let's say for example, ...
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Recommended books/resources for IRRBB risk metrics calculation
Any recommendations for books/resources/videos/on-demand courses for in-depth IRRBB-related risk metrics calculation etc?
Yield Curve Risk, Basis Risk, Repricing Risk, Optionality Risk, Value at Risk, ...
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Why do we need the covariance when calculating portfolio VaR?
I was recently learning about value at risk and how to calculate it, and one of the steps was to calculate the covariance of the returns of the securities making up the portofolio.
This makes sense ...
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Wider VaR for portfolio risk?
Is there a way to widen the 95% VaR by changing the distribution of a portfolio of stocks? When calculating 95% VaR of my portfolio using the holdings based approach (which requires the covariance ...
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Value at risk (portfolio with stocks, bonds, and options)
I am building a VaR model (in Excel using the variance-covariance method) for a portfolio containing stocks, bonds, and an ETF. Additionally, there is a put option (out of the money) that is there to ...
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VaR backtesting. Reasons for over- and underestimation of value at risk estimates?
I use an ARMA-GARCH model for univariate distributions and a copula model for the multivariate distribution. For the value at risk (VaR) estimation, I do a Monte Carlo simulation. I'm looking for some ...
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Call Value After 98 percentile drop in Stock Price
This question is from Joshi's quant book.
Assume r = 0, σ = 0.1, T-t = 1, X = 100 = S(t).
Initially, the call is worth $3.99.
The first question asks what the value of the call is after a 98 ...
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How to derive numeric option VaR with delta-vega normal approach?
For an option with price C, the ΔC, with respect to changes of the underlying asset price S and volatility σ (first-order approximation), is given by
$\Delta C=\delta \Delta S+\nu\Delta\sigma$,
where ...
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Surface SVI and value-at-risk computation [duplicate]
Currently interested in some Value-at-risk calculation methods, I understood in a video by Claude Martini (https://youtu.be/_OZvk-G92EQ), that it is now common to see SSVI-based VaR calculation models ...
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Calculate Value at Risk for a futures contract or option position [closed]
How could we calculate VaR for a futures contract or a option position? I know that a VaR is calculated by the return multiply the investment amount, but how could we calculate the investment amount ...
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stressed VaR and VaR [closed]
Can someone please explain to me how most banks calculate their stress VaR. is there a regulatory-defined time series, such as the 2008 to 2009 period, to apply to the current position? My ...
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Value at Risk for a dollar neutral relative trades
So assuming I am entering a trade to long A stock at 10 and short B stock at 20. And assume we want the position to be dollar neutral, so we are going to long 2 shares of A and short 1 share of B. ...
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MonteCarlo Value At Risk for futures portfolio
I wanted to ask, suppose I have a portfolio of futures of gasoline and other oil products eg ULSD (Ultra Low Sulphur Diesel), WTI (West Texas Intermediate) for different months. I want to compute the ...
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Calcul du VaR sur une option call [closed]
Bonsoir. J'aimerais solliciter de l'aide à travers ce premier message. J'ai besoin de savoir comment calculer la VaR d'une option call dont le strike = 3200, date d'expiration est le 20/12/2024 et ...
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VaR on forward contracts
I am trying to calculate a historical VaR, let's say on a forward contract of Gas that has a delivery in December 2022 ( begin delivery = 1st December 2022 and end delivery = 31st December 2022).
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Showing that VaR is not sub additive
I found on pages 2 and 3 of Martin Haugh's "Risk Measures, Risk Aggregation and Capital Allocation" from 2010 an example showing non sub-additivity of VaR (excerpts given at the end).
I ...
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Portfolio with Put Options - VaR, Std. Dev
I did a Monte Carlo simulation to evaluate my portfolio. I used different Strikes and Weights for the Put options. Now to my problem: All statistical measures (like expected return, volatility) ...
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How can I estimate value-at-risk of a long/short portfolio without making simplifying assumptions?
I have had a couple of long-standing questions about the mathematics behind a simple "vanilla" parametric VaR calculation and I'm hoping someone could clear up my confusion. Most likely I am ...
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How to calculate the gaussian VaR for a portfolio with 3 corporate bonds and 1 IRS payer?
As data I have the daily change of zero coupon spot rates for some vertex (0.25, 0.5, 1, 2..) and the daily change of z-spread for corporate bonds, also by vertex
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Do you roll back the maturities and schedules when backtesting VaR for portfolios of bonds, options or future contracts?
I want to backtest VaR models which are applied to portfolios of products which have maturities (options and futures) and even schedules (bonds). I have a question which never came up when backtesting ...
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compute Expected Shortfall / Conditional VaR from distribution
I want to compute the Expected Shortfall from a distribution of returns.
I have no closed solution for my distribution of returns, so I wonder if I can simply compute ES by taking the mean of all the ...
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2-day ahead prediction of value at risk with GARCH(1,1) in R
Let's say I have a 10 year dataset of Tesla (example) and I am taking the percentage change of lag 2:
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Variance covariance matrix for a portfolio of credit derivatives
If the var-covar matrix for equities takes the return on equity prices, what should the var-covar matrix for credit derivatives (like a CDS) take?
Should it be the probability of default, since that ...
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Simulating the Value-at-Risk with $t$ distributed returns
I want to understand how the value at risk and the simulating the VaR with simple Monte Carlo method. But I want just a confirmation and are welcome any comments, since I don't have the full picture ...
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VaR on Interest Rate Swaps
I am a newbie and was after a simple explanation on how VaR is calculated for a portfolio of IRS's.
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Does VaR calculations consider my portfolio past
I am relatively new to trading and decided to become more quantitative about it. I have had a portfolio for about two years, where I changed my positions several times.
I now learnt about VaR ...
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How is VaR calculated for forward contracts accounting for European put options?
My initial idea is to create profit and loss using an equation like this:
\begin{align}
P\&L = & \text{European Put P&L} + \text{Forward P&L}\\
P\&L = & [(K-S_T)^+...
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PRIIPs KID: if VaR (Return Space) < -1, how to compute VEV (VaR-equivalent volatility)?
The PRIIPs regulation does not specify how to compute the VaR-equivalent volatility if $VaR_{Return Space} < -1$. What would you do in the following case?
I have the following moments from the ...
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How is a return-adjusted nearby created?
I am reading Value-at-Risk Second Edition – by Glyn A. Holton
https://www.value-at-risk.net/futures-nearbys-and-distortions/
From 6.6.1 "The standard means of obtaining continual time series from ...
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How is VaR calculated with mixed return-periods
For example, if you have a dataset of returns that are not daily or yearly, but span 24 days, 1 day, 5 days, 7 days, etc., how do you calculate or interpret the VaR of that? I've tried linearly ...
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Risk factor mapping of a foreign bond
Suppose the investor is Australian, and there is a single, 3-month, USD-denominated zero-coupon bond with a face value of \$1 million USD. The AUD/USD exchange rate is \$1.2AUD/USD, and the 3-month US ...
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How to set VaR and other Risk Limits
I have read a lot of literature on how to calculate VaR and it's advantages and disadvantages. But I am struggling to find anything on how to set a VaR limit.
For example, say if I am a Risk Manager ...
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Filtered Historical Simulation VaR for swaps
I am trying to understand how to calculate FHS VaR for a portofolio of vanilla swaps. I think I understand the main ideas behind FHS VaR and how to implement it for other assets such as equities. I ...
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Which distribution has higher VaR?
Let say I have 2 distributions with cdf $F_1$ and $F_2$. And I know that $F_1 \leq F_2$. With this information I know that $F_1$ has bigger lower tail than $F_2$ but I don't think this right away ...
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Computing VaR in a Monte Carlo simulation (question from Joshi's book)
I am studying Joshi's book on C++ for derivatives pricing. I am at chapter 5 on implementing a statistics gatherers class to use in a (simple) MC routine for pricing vanilla options, where it is ...
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Is there a Python package that implements backtesting for VaR?
I would like to use the tests of Christoffersen (1998), Engle and Manganelli (2004) or Kupiec (1995) to evaluate how good are the VaRs that I have projected. Is there a library that implements these ...
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Testing severity of VaR by changing portfolio component weights
Let's assume that I have a portfolio with two components:$$\omega_i = 0.3$$ $$\omega_j = 0.7$$
I also have two P&L vectors, $v_i$ and $v_j$ each containing 1000 P&Ls. I would like to play ...
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Showing that the shortfall-to-quantile ratio of a normal distribution goes to one
I dont get why $$\lim_{x \to \infty}
\frac{\mu \{1 - \Phi(x)\} + \sigma \phi(x)}{(\mu + \sigma x) \{1 - \Phi(x)\} }
= \lim_{x \to \infty}
\frac{1}{1 - \sigma \frac{1 - \Phi(x)}{(\mu + \...
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recalculate VaR from one currency to another
I have a strange question. For example, I have 95% VaR (1Y, delta-normal) for portfolio with one stock in same currency (for example, USD). What minimal information should I have for recalculation ...
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Value At Risk Rigorous Definition
Reading a paper about VaR and don't understand what $a'$ is. The link to the paper is here: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.878.8823&rep=rep1&type=pdf. The relevant ...
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Delta-Gamma VaR approximation and cross-gamma
Suppose we have a portfolio of say two vanilla options (e.g. on two index futures). One option A with underlying X and a second option B with underlying Y. I'm trying to calculate the delta-gamma ...
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Why is infimum chosen to define value at risk as opposed to the minimum?
I believe that the VaR is defined as the infimum of the generalized inverse of the CDF of the loss function (something like that, please correct accordingly):
$$\text{VaR}(\alpha)=\inf\{x: F_L(x)\geq \...
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