Putting VaR to Work
About the Lecture
The lecture Putting VaR to Work by Edu Pristine is from the course Archiv - Valuation and Risk Models. It contains the following chapters:
- Full Valuation Method
- Historical Simulation
- Monte Carlo Simulation
- Comparison between Methods
- Visualizing WCS
- Stress Testing
- Sceneraio Analysis
Author of lecture Putting VaR to Work
Edu Pristine
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Excerpts from the accompanying material
... scenarios over a time period. It can be used to cover a large range of values of the portfolio returns in order to provide more accurate re sults. It generally provides more accurate results compared to ...
... model risk. © EduPristine For VaR-I (Confidential) 63 The biggest drawback with the Historical Simulation method is that the changes in volatility and correlation from structural changes are not recognized . We have an asset with ordered simulated price returns as belo w for ...
... is a non Linear derivative whose payoff in creases with the increase in the volatility. Also delta normal VAR increases with the increase ...
... Decomposes the covariance matrix and ensures that the risk f actors are correlated in each scenario. The scenarios start from today's market condition and go one day forward to give possible values at the end of the day. Full, nonlinear pricing models are then used to value the portfolio ...
... Historical VaR, it can generate an infinite number of scenarios and therefore test many possible future outcomes. Disadvantages: The calculation of Monte Carlo VaR can take 1,000 times longer than Parametric VaR ...
... major factor, the delta normal method is fast and efficient. For portfolios with substantial non-linear ...
