Questions tagged [value-at-risk]

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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 ...
0 votes
1 answer
90 views

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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1 answer
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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 ...
0 votes
1 answer
72 views

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) ...
0 votes
0 answers
28 views

Stochastic Approximation of CVaR / VaR mini-batch

I know that minimizing MSE in stochastic gradient descent is done by minimizing the MSE estimated from a mini-batch of observations. This implies minimizing the MSE of each observation (I think of a ...
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Value at Risk on equity options, what is the right approach on historical simulations

Questions on Historical VaR for options, how do you actually do this. how you would evaluate Value-at-Risk for an equity option that has been recently listed on the exchange. The obvious is that you ...
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1 vote
0 answers
87 views

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 ...
1 vote
0 answers
54 views

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
0 votes
0 answers
26 views

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 ...
2 votes
0 answers
32 views

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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0 votes
1 answer
100 views

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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0 answers
54 views

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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1 vote
2 answers
260 views

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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0 votes
1 answer
53 views

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 ...
1 vote
0 answers
99 views

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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1 vote
1 answer
188 views

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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1 vote
0 answers
65 views

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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0 votes
0 answers
21 views

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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1 answer
264 views

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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2 answers
76 views

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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0 answers
43 views

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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1 vote
1 answer
109 views

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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1 vote
0 answers
53 views

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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0 votes
1 answer
68 views

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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0 votes
1 answer
78 views

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 ...
0 votes
1 answer
186 views

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 ...
0 votes
2 answers
154 views

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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0 answers
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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 ...
1 vote
1 answer
124 views

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 ...
0 votes
1 answer
581 views

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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1 answer
54 views

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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2 votes
1 answer
77 views

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 + \...
0 votes
2 answers
168 views

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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0 answers
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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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1 answer
288 views

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 \...
2 votes
2 answers
216 views

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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2 votes
0 answers
53 views

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, ...
0 votes
1 answer
104 views

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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1 answer
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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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0 votes
2 answers
188 views

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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0 votes
1 answer
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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 ...
3 votes
1 answer
152 views

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 ...
0 votes
1 answer
112 views

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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3 votes
1 answer
414 views

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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0 answers
63 views

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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1 vote
1 answer
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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 ...
1 vote
1 answer
91 views

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 ...
1 vote
0 answers
104 views

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} : ...
0 votes
2 answers
175 views

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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