Questions tagged [value-at-risk]
The value-at-risk tag has no usage guidance.
162
questions
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27 views
Good ways to select best decision among N decisions, each with a profit/loss distribution?
I'm working on a problem where an asset owner (e.g., owner of a factory, power plant, etc.) can take a number of possible decisions (say 10). Each of those 10 decisions entails certain actions, but ...
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1answer
51 views
Do stationary prices need to be differenced for VaR?
I have a time series of electricity futures prices that I have shown to be stationary via the Augmented Dickey Fuller test (alpha = 0.05). Does that mean that, in calculating their individual values-...
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1answer
45 views
Can I say VAR is a prediction report?
We use Algorithmics RiskWatch where portfolios are analyzed by VaR over scenarios. Can I say that they are predictions reports? or descriptions reports?
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41 views
Correct way to calculate interest rate volatility for risk calculations
I'm trying to include interest rate derivatives in some Value at Risk calculations and am having trouble getting trustworthy values. My current approach is to look at the appropriate risk factor for ...
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1answer
37 views
Delta-normal VaR of portfolio of stock and call option
I have to calculate the 10-day 99% VaR of a portfolio that consists of a portfolio of 260 stocks of a company $K$ and that is short 500 call (European) options of the same company.
I know that the ...
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1answer
30 views
Value at Risk under increasing function
There is an exercise I struggle to solve. I hope you can give me a hint.
Let X be random variable taking values in $I\subset \mathbb{R}$. I have to show that the Value at Risk is invariant under any ...
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21 views
Decomposition of Contribution to Variance
$C$ is a $N\times N$ covariance matrix of stock returns. Assuming $w$ is a vector of positions in each asset, the total variance of the portfolio is
$$w^TCw$$
The contribution to total variance of the ...
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16 views
How to prove the following relation of Conditional Value-at-Risk and Value-at-Risk and Conditional Tail Expectation?
How to prove the following relation of Conditional Value-at-Risk and Value-at-Risk and Conditional Tail Expectation????
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49 views
What is the differential Value-at-Risk?
I am currently working on a Machine Learning Project, implementing portfolio optimization algorithms according to different risk measures. I have found sufficient information on Sharpe Ratio ...
2
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1answer
53 views
Cornish Fisher VaR Parameters Calibration
I am trying to calculate Cornish-Fisher (modified VaR), but I am in a trouble because when I am reading some articles, some authors calculate the Cornish-Fisher expansion taking parameters S and K, as ...
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25 views
Univariate Portfolio Analysis
We want to form 10 portfolios based on the level of VAR (99%) for equity data over a 30 year period. Portfolio 1 is the portfolio of stocks with the lowest value-at-risk and Portfolio 10 is the ...
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31 views
Backtesting conditional VaR
I'm writing a thesis about conditional VaR of Standard & Poor's 500 index. I have fitted my log-returns with GARCH(1,1)-proces and then made some conditional VaR-forecast (500 observations) with ...
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17 views
Variance minimization vs. Value at risk
When computing Minimum Variance Hedge Ratios as explained f.e. in Hull (2012) the goal is to select a hedge ratio such that the variance of the portfolio is minimized. My question is now what are the ...
4
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1answer
62 views
CRRA Ultilityļ¼ simple question
for CRRA, does increasing gamma leads to increase in risk-aversion?
Looking at the curve, I think increasing gamma leads to less in risk-aversion (since the risk preimum is less). But in terms of ...
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1answer
70 views
Determining Value at Risk of a Poisson distribution
If my discrete random variable had a poisson distribution with both moments say equal to 10, how can I find the Value at Risk for a 95 percent confidence interval?
I have seen that I need to ...
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2answers
143 views
How do you calculate value at risk on a portfolio of fixed income instruments
I'm curious about this question both for a parametric "Delta" style approach and a Monte Carlo full revaluation approach and I will lead one question into the next.
Taking the "Delta" approach first. ...
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1answer
33 views
How are non-equity derivatives handled in monte carlo Value at Risk simulations
If you have a portfolio of stocks and options it's straight forward enough to generate correlated stock paths and evaluate the positions at the end of the time horizon, but what do you do if your ...
2
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1answer
42 views
Incremental/marginal contribution to VaR in a simulation setting
Estimating marginal contributions to VaR in a simulation setting is apparently quite difficult (see e.g. this blog post) due to issues with sampling variability. My question is whether the following ...
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59 views
portfolio return, sharpe ratio and value at risk
Can you please help me to confirm if my calculations are correct or need improvement, or (too simplistic...) :
- portfolio return,
- portfolio standard deviation,
- portfolio sharpe ratio
- ...
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1answer
67 views
How accurate is the square root of time rule for VaR for a portfolio containing several different types of instruments
Assuming that your value at risk model is based on normality assumptions, e.g. using a Delta-Gamma normal model does the approximation hold perfectly for a portfolio of stocks and options? What about ...
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20 views
Lognormal asymmetry implication on Value at Risk
To examine the Value at Risk implications for a portfolio consisting of a spot and futures time series I have generated a 1-day monte carlo simulation. I was long in the spot and short in the future (...
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1answer
59 views
Value at Risk (VaR): Normal distribution with gamma distributed volatility
If I was to do a 99% VaR calculation on a portfolio with normally distributed returns $\mathcal{N} (\mu,\sigma)$, the 99% VaR would be $\mu - 2.33\sigma$.
Instead of having a constant volatility, let'...
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26 views
Correlation in GARCH model
I don't think I have ever come across the concept of stochastic correlation so I imagine it's not very widespread, but I had the idea to implement a Monte Carlo VaR model for a portfolio of stocks by ...
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1answer
72 views
How does delta-gamma VaR work in practice and when can it be preferable to Monte-Carlo VaR?
So I will start off by just stating my understanding of the two methods through some examples and lead that into my question. Hopefully it is correct but if not then perhaps the answer to my question ...
4
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1answer
153 views
Value at Risk for portfolio with different maturities
I am new to StackExchange and relatively new to quantitative finance.
I work at a commodity trading company and we have an extensive portfolio of futures and options on commodities (traded on the CME, ...
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0answers
40 views
Can value at risk be computed using downside deviation?
Value at risk is usually computed with a regular standard deviation. But can it be computed using downside deviation (semi-deviation) instead? Particularly if I want to consider a Var that includes ...
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1answer
231 views
99.97% Percentile VaR Approximation
I have been working with a group which references a 99.97% 10-day VaR figure.
They calculate this value via a 99% 1-day historical simulation over 500 days and then scale it under the assumption of a ...
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29 views
Interpretation of $\alpha$ (confidence level) in mean CVaR optimization
How are an investors risk preferences related to $\alpha \in (0,1)$ in a mean CVaR optimization?
Would a risk averse investor choose a higher value of $\alpha$, and if so why?
My understanding is, ...
2
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1answer
186 views
Analytical portfolio optimization for VaR under multivariate normality
Given a set of assets with returns following a multivariate normal distribution with a known mean vector and a known covariance matrix,
$$
r \sim N(\mu,\Sigma),
$$
I want to find optimal portfolio ...
2
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1answer
570 views
Absolute and Relative Value at Risk
Is it correct to calculate the VaR as 99% max between loss and profit. E.g. if 99% VaR on the loss side of the distribution is -100, and on the positive side of the distribution there is a value ...
2
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1answer
169 views
Stop-Loss strategies
Does anyone know some bibliography about the problems or limitations of using Stop-Loss strategies in a portfolio?
Let me explain better: for example you can have a portfolio of 30 stocks from ...
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1answer
94 views
Backtesting a stock scoring model
I'm working on a simple stock scoring model consisiting of 3 factors:
1.market cap
2.liquidity of the stock
3.the value at risk
we defined 3 intervals for each factor and we assigned the ...
4
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1answer
167 views
Portfolio optimization w.r.t. value at risk: introductory or survey references
I am looking for references introducing the problem of portfolio optimization when the target characteristic is value at risk. A textbook treatment would be great. Surveys on the topic are also ...
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31 views
Estimator for Conditional value at risk (average value at risk)
I am following a book: Advanced Stochastic Models, Risk Assessment, and Portfolio Optimization by Svetlozar T. Rachev, Stoyan V. Stoyanov, Frank J. Fabozzi
I'm learning about average value at risk. ...
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61 views
How to calculate value at risk in accordance with Basel?
I would greatly appreciate if you could let me know whether Value at Risk should be calculated for net open position (foreign currency assets-foreign currency liabilities) or for foreign currency cash?...
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1answer
99 views
Block maxima estimation of Expected Shortfall
I want to calculate the expected shortfall of a return series with the block maxima (BM, link) method in Extreme Value Theory, however I can't seem to find out how this should be done. All papers I'...
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2answers
137 views
understanding Value-at-Risk correclty
The are several types how to calculate the VaR. I am focussing on the method of calculation the VaR in percentage.
$VaR=I*z*std*\sqrt{t}$
This gives the VaR in ā¬.
I have the z-value, the daily ...
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1answer
156 views
CVaR formulation
I am a research intern and I am working on a topic about a profit maximization of a risk-averse newsvendor by using Conditional Value-at-Risk.The problem is that I found different expressions of CVaR. ...
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2answers
58 views
From risk limits to pnl projection?
As a fresh risk manager, today I got an assignment to check whether our risk measurements / limits are setup properly (whether the limits are so tight that affect our p&l) . Better if I can ...
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78 views
Approximation of portfolio VaR (after mapping) when Delta and Gamma both equal zero
As titled, I am having trouble estimating the VaR of a portfolio mapped as a function of a single risk factor $S$, in the form :
$$V(S) = S^3 - 30S^2 + 300S + 150$$
with current value $S = 10$.
$S$...
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2answers
1k views
How to add Risks-Not-In-VaR (RNIV) to VaR under Basel III
I am trying to generate/prove the magnitude of the over-conservativeness of the regulatory VaR (internal models) under Basel III against what a more accurate VaR would be.
However, I can't seem to ...
2
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1answer
171 views
PCA on a portfolio of spot and forward contracts
I have a portfolio of spot and FX forwards on various currencies all based to AUD. I need to able to quantify how the changes in amount, tilt and curvature of the AUD curve would impact my p/l.
...
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1answer
228 views
Historical Simulation of Bond, Stock and Option Portfolio
If I have a portfolio consisting of
1-one stock of unit price equal to S,
2-one 9% coupon American bond with 20 years to maturity and a par value of $1000,
3-and one European call option on the ...
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33 views
How to measure specific risk charge?
IFRS requires banks to compute different risks including market risk based on Basel iii.
To do so, the capital requirement is defined as follows:
$$max(VaR_{tā1},m_c Ć VaR_{avg}) + SRC$$
$SRC$ is ...
2
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2answers
138 views
Modified Sharpe ratio
I would like to model different type of investors, hence I need to find some kind of utility functions to optimize. Apart from very abstract exponential utility function, I couldn't find any proper ...
1
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1answer
141 views
Prove Subadditivity - Entropic Value at Risk
Any insight in how to prove the following risk measure is subadditive?
$\rho_{1-\alpha}(X) = \inf_{z>0}\{z^{-1}\ln(\frac{E[e^{zX}]}{\alpha})\}$, with $\alpha \in ]0,1]$
I want to prove it is a ...
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0answers
72 views
Opposite of Value-at-Risk. Criteria for Optimization
I'm trying to optimize portfolio of undervalued and portfolio of overvalued stocks. I have simulated scenarios of stock returns, and based on them I would like to find optimal weights. One criteria is ...
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44 views
Risk Measure-identication
Let X be a variable with existing moment generating function $M_x(z)=E[e^{zX}]$.
Define the following risk measure: $\rho_{\alpha}(X)=inf_{z>0}(z^{-1}ln(\frac{M_x(z)}{1-\alpha}))$
Does anyone know ...
2
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2answers
999 views
1 day VaR vs 10 day VaR
Even while using historical simulation VaR, 1 day VaR is converted into 10 day VaR by multiplying 1 day VaR by Sqrt(10) for regulatory reporting purposes.
What are the underlying assumptions for ...
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134 views
Compute the VaR from NPV (Net present value)? [closed]
A client is evaluating an investment in
Indochina requiring an initial expenditure (period 0) of 10,000, and
which then in periods 1 and 2 gives a benefit V1 and V2. Assume
that the discount rate to ...
