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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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Fitting a Copula with GARCH volatility to stock returns

I have the log-returns $r_{n,t}$ for 3 stocks, $n=1,2,3$, and $t=1,..,T=365$ days, and I want to model the expected shortfall given arbitrary positions on those stocks. I calibrate the GARCH model ...
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Profitability on Value at Risk forecasting

I'm conducting a research related to Value at Risk forecasting using volatility models like GARCH and others. My predictions are turning out quite well with some models. Is there a way to capitalize ...
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Scaled VaR: approximation vs reality

Previous question: Understanding VaR rescaling After understanding the usual VaR scaling formula $$\text{VaR}_{T,\alpha}=\sqrt{T}\text{VaR}_{1,\alpha}$$ I wanted to know by how much it deviates from ...
augustoperez's user avatar
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Understanding VaR rescaling

Assume my portfolio has a current market value of $V_0$, that the daily returns are independent and identically distributed as a normal distribution $N(0, \sigma^2)$ and that there are $N$ trading ...
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Value-at-Risk of a portfolio with a stock after recent IPO

I have a task to calculate VaR for a portfolio of stocks and bonds. The main problem is that there is 1 stock which IPO was in November 2023 so there is few data points. To cope with that I came up ...
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My Montecarlo Simulation is not working?

My aim is to predict 1 year ahead and daily, the price of a stock under certain scenario. These scenarios are the ones that this year the stock will have a similar year, in terms of standard deviation ...
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Simple concepts around return, VaR, etc

In a simple setup, let's say $(w_1,w_2)$ are weights invested in assets $1$ and $2$ with prices $S_1$, $S_2$. I only saw discussions when $w_1 + w_2 = 1$, even if short selling is allowed. Suppose $...
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Circular block bootstrap (CBB) Value-at-Risk (VаR)

I am calculating Value-at-Risk (VAR) with the Circular block bootstrap (CBB) method. How do I complete the circle and join $P_{10}$ and $P_1$ so that I do not get -70% yield? If I proceed with CBB VAR ...
Ragewave's user avatar
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Backtesting of VaR estimates

Regulators want to backtesting VaR estimates based on both Risk theoretical PnL and ...
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Use filtered historical simulation to calculate VaR on a repo trade

I would like to calculate the VaR for a repo trade using filtered historical simulation incorporating GARCH. So, for example, in the first leg, 3000 of bond goes out on day 1. In the second leg, 3000 ...
user20831463's user avatar
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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 ...
Ankita Datta's user avatar
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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 ...
Brian Smith's user avatar
2 votes
1 answer
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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, ...
Restu's user avatar
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2 votes
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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 ...
abdelrahman esmat's user avatar
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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 ...
we_are_all_in_this_together's user avatar
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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 ...
Etomna's user avatar
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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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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 ...
Frank Cheng's user avatar
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175 views

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 ...
risknewbie's user avatar
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1 answer
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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 ...
Hustler885's user avatar
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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 ...
Garn Lockov's user avatar
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487 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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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 ...
CLARA.19's user avatar
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1 answer
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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) ...
Financeguy's user avatar
1 vote
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132 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 ...
David Loungani's user avatar
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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
Alessandro Campagna's user avatar
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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 ...
leonnis's user avatar
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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: ...
user avatar
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1 answer
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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 ...
coffee-raid's user avatar
1 vote
1 answer
454 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 answer
749 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.
Andy's user avatar
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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 ...
user1234's user avatar
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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)^+...
Kyle's user avatar
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1 answer
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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 ...
glaucon's user avatar
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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 ...
Kyle's user avatar
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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 ...
Kyle's user avatar
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1 answer
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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 ...
mclovine's user avatar
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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 ...
NutellaMonster's user avatar
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2 answers
549 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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