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".
444 questions
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1 answer
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Historical scenarios for VaR/ES of CDS indexes spread
Historical series of CDS indexes spreads rebase twice per year. These events introduce two "technical" scenarios (even 10 bps, not marginal) which could affect historical market risk ...
1 vote
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Are the tail exponents of daily, monthly, and annual log returns the same?
Mathematically it should be the same, $\nu$ doesn't change if we aggregate x. $$Pr(X>x)∼Cx^{−ν}$$ Yet, it feels a bit extreme to assume that annual and daily log returns have same $\nu$. I need to ...
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Are ICE commodity closing prices confidential?
The Inter Continental Exchange (ICE) publish their closing prices for various commodities online but state in their terms of service that these are confidential and can't be disseminated without ...
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CVaR/VaR-based Sharpe ratio calculation problems
guys. Currently I'm trying to realize one portfolio allocation model. I have n-1 risk assets and 1 fully unrisk asset. So, at i ...
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2 votes
1 answer
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Adapting VaR model in a dynamic trading environment
I study FRM part II (P2.T5.25.5 Conceptual Soundness and Sensitivity Analysis in VaR Models) and encounter this question in Bionic Turtle, please help. Would really appreciate if you can provide with ...
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1 vote
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What is the formula for value-at-risk (VaR) when the asset value follows an exponential distribution, and how can it be derived? [closed]
For example, say an asset value in 10 days follows an exponential distribution with mean $ W_{0} $. What would the formula for the value-at-risk for confidence c and reference level $ W_{0} $ for the ...
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4 votes
1 answer
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Rationale behind independence testing (e.g. Christoffersen’s test) for Value at Risk backtesting
I'm reading up on backtesting methodologies and having trouble understanding the rationale for independence testing using, for example, the Christoffersen method. (Christoffersen, Peter F: Evaluating ...
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GARCH parameters generating simulations that have a lot higher standard deviation's than the historical standard deviation
Below is code using the rugarch package for the daily returns of the NDX, XAU and XAGm. The issue is that when I simulate the data 200 steps ahead for 50k sims, calculate the standard deviation of the ...
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1 vote
1 answer
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Is GARCH (and or it's variations) actually used in risk-modelling for expected-shortfall?
I understand there are limitations and practicality issues with GARCH, but does any company actually use it in their risk-management system when calculating their expected-shortfalls? Even as a basis ...
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1 vote
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p VaR: what is p?
English Wikipedia describes $p$ as the probability of a loss exceeding $p$ VaR. But I've also seen $(1-p)$ VaR to denote the same thing (for example German Wikipedia seems to go that way). So, eg, $95\...
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Log-Return Distribution Assumptions in VaR and CVaR Calculation Using Monte Carlo Simulation with the Heston Model
I want to calculate VaR and CVaR using Monte Carlo simulation and by estimating volatility with the Heston model. Do the asset log-returns have to be normally distributed? Because I haven't found any ...
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Calculate the VaR of a 3 asset portfolio
How do we solve this problem? I know that i'm supposed to build a variance/covariance matrix and then do the square root of the total variance. But i don't know why the FX is included in the ...
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2 votes
1 answer
298 views
How to handle intraday risk when evaluating performance with PnL/VaR?
When evaluating a proprietary trader's performance at the end of the year, it's common to use the PnL/VaR ratio as a key metric. From what I understand, the VaR used as the denominator should ...
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0 votes
1 answer
457 views
Parameter estimation of Heston model for VaR using Maximum Likelihood
I found an article file that explains how to estimate the parameters of the Heston model. I want to use the parameter results to calculate the value at risk. However, after reading it, I realized that ...
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1 vote
1 answer
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Transforming log-return expected shortfall to arithmetic-return expected shortfall
When deriving the Value at Risk (VaR) for log returns, one can easily transform the log-return VaR to an arithmetic-return VaR via $VaR_{arithmetic} = e^{VaR_{log}}-1$ However, how is the log-return ...
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