Questions tagged [value-at-risk]
The value-at-risk tag has no usage guidance.
402
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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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MultiFactor Risk Model Ex Ante StDev vs. StDev of Monte Carlo PnL Distribution
In the context of applying a multifactor risk model to a portfolio of linear and nonlinear equity securities, why would there be differences between the calculated ex ante portfolio stDev and the ...
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Question regarding 1% VaR of Returns [closed]
I need some help with a homework question. The question is as follows:
"Consider two returns R1 and R2, which have the same mixed continuous discrete distribution:
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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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Backtesting Conditional Versus Unconditional forecast horizon with lag 2
Assume that we have a 10 year dataset from Tesla (toy example):
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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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Backtesting Strategy in R for simple empirical value at risk
I am new in backtesting methodology and I want for start to keep things simple.Say that I have the following data:
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user57440
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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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EWMA initial margin model risk
Let's say that someone wants to estimate the initial margin model (very simple one) with the exponential weighted moving average approach.For margin period of risk 2 days.
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How can I impose a restriction where monetary policy affects the other variables in the next quarter rather than instantly using VAR estimation?
I am investigating the impact of GDP growth, inflation, and monetary policy on each other using VAR analysis. The number of Lags is 2.
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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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132
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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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Bond VaR with z-spread
I want to calculate VaR for bonds using historical z-spread changes. I want to apply the changes to the present day z-spread, reprice the bond and obtain the PnLs from which I can calculate VaR.
But ...
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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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Backtesting Value-At-Risk (20-days)
I calculate the 20-day returns of (rolling window) of historical stock prices of 2 years. Are there any problems (like autocorrelation) when I want to backtest the VaR (Value-at-Risk) model?
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Dependence between Credit Default Risk and Credit Spread Risk
I am trying to understand the difference and similarities between Credit Spread Risk and Credit Default Risk.
Here is brief (and not all too precise) definition.
Credit Spread Risk: Losses due to ...
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Martingale corrections to historical Value at Risk?
I am looking for a bit of advice. I have recently used to a new firm, which uses Value at Risk in a manner that is unfamiliar from previous places I have worked that I find less than ideal.
Previous, ...
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Portfolio VaR using a gaussian copula
I have a portfolio consisting of bonds, stocks, fx and property. I'm using Monte Carlo to estimate the VaR of this portfolio. To generate the forward-looking interest rate risk factor scenarios I use ...
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VAR of Long & Short European Call Options
I have over 1000 simulated stock prices for an option that is expiring in 3 months. I have calculated the EU call option payoff of 1000 simulated prices and now I have 1000 simulated payoffs of call. ...
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Standard market risk platform Value-at-Risk (VaR)
if possible, could you share publicly available methodological guides/pamphlets or post links to specialised websites which give sufficient detail of the basic assumptions, algorithms and possible ...
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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....
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Estimating VaR of bond due to changes in the US yield curve
I am attempting estimate the 99% 10-day VaR of an investment grade bond due to changes in the US yield curve. The data provided is the daily prices of the bond over time. In addition I have the Daily ...
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Correlation for Trading vs. Risk Management
Assume a portfolio that contains some asset A and that I am contemplating hedging my delta in A by taking a position in asset B. I would determine how much of B to buy/sell based on the linear ...
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Is scaling the standard deviations in the VaR formula (parametric) equivalent to scaling the VaR figure at the end?
I have come across people calculating parametric VaR who scaled the standard deviations by say square root of 10 to scale up to a 10 day horizon.
Elsewhere I have seen textbooks suggesting that it is ...
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Parametric VaR, Normality and Subadditivity
Good evening; I just have a simple question about Value at Risk and the subadditivity property, and I know that it may sound silly
I got that, in general, VaR is not subadditive. However, if a ...
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what is a simple parametric VaR approach that can be used to compare with ISDA SIMM results?
i am looking for a simple parametric VaR approach that includes vega and/or gamma.
i am not sure if to choose a non symmetric distribution for the pnl, what would people use, perhaps some shifted ...
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VaR and Expected Shorfall estimations with negative shape parameter of a GPD (Extreme Value Theory )
So im trying to replicate an code from the Quantative Risk Management Book (https://github.com/qrmtutorial/qrm/blob/master/code/09_Market_Risk/09_Standard_methods_for_market_risk.R). But when i try a ...
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Optimal Portfolios with Skewed and Heavy-Tailed Distributions
I am learning about portfolio theory and been using Markowitz. I wondered, however, if I can use distributional and asymmetric information of the returns to solve the problem. For instance, I have a ...
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Interpretation of Value at Risk
Let $X$ be a Loss random variable (Positive values of X represents Losses) and let $p \in (0,1)$. I know that the Value at Risk at level $p$ of $X$ is defined as:
$$VaR_p(X) = inf{\{x \in \mathbb{R} : ...
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10-day VaR for a portfolio
So, Bank ANZ owns a portfolio of options on the USD/GBP exchange rate. The delta equivalent position of the portfolio is GBP 56.00. The current exchange rate is 1.5, with a daily volatility of 0.7 ...
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Calculating the Value-at-Risk when changing the confidence level
If I have a VaR estimate at a 95% confidence interval is 10, how do I calculate the approximate level of the VaR if the confidence level was raised to 99%, assuming a one-tailed normal distribution?
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Capital Allocation, VaR, Expected Shortfall
Are there any serious drawbacks / weaknesses in the Euler allocation method, when used to allocate VaR capital (and potentially Expected Shortfall) to risk factors in a portfolio? I notice that ...
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Value at risk, risk-neutral vs real-world probability measures
Does anyone know if there is any link between the Value at Risk of risk-neutral distribution and of the real-world distributions of asset rate of returns?
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