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Value At Risk Sep 22

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av vedpuriswar
av vedpuriswar

Overview of Value at Risk

NegóciosEconomia e finanças
1 de 75
Value at Risk By A V Vedpuriswar September 15, 2009
What is VAR? ,[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Illustration
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Problem What is VAR (90%) ? % Returns Frequency Cumulative Frequency - 16 1 1 - 14 1 2 - 10 1 3 - 7 2 5 - 5 1 6 - 4 3 9 - 3 1 10 - 1 2 12 0 3 15 1 1 16 2 2 18 4 1 19 6 1 20 7 1 21 8 1 22 9 1 23 11 1 24 12 1 26 14 2 27 18 1 28 21 1 29 23 1 30
[object Object],[object Object],[object Object],Solution
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution Weekly VAR ＝ (12,500) (√5) ＝ 27,951 Monthly VAR ＝ ( 12,500) (√20) ＝ 55,902 Semi annual VAR ＝ (12,500) (√125) ＝ 139,754 Annual VAR ＝ (12,500) (√250) ＝ 197,642
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object]
Problem ,[object Object]
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],VAR as a benchmark measure
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],VAR as a potential loss measure
[object Object],[object Object],[object Object],[object Object],[object Object],VAR as equity capital
[object Object],[object Object],[object Object],VAR as an information reporting tool
[object Object],[object Object],[object Object],[object Object],[object Object],VAR as a risk control tool .
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],VAR as a measure of risk adjusted performance
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object]
Parametric and non parametric methods ,[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],VAR Methods
[object Object],[object Object],[object Object],[object Object],Delta normal approach
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],Delta Gamma Method
[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],Historical simulation method
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],Monte Carlo Simulation Method
[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],Selective Sampling
[object Object],[object Object],[object Object],[object Object],[object Object]
 
[object Object],[object Object],[object Object],[object Object],[object Object],Backtesting
[object Object],[object Object],[object Object],[object Object],Choosing the method
[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object]
V A R Applications Passive Reporting risk Disclosure to shareholders Management reports Regulatory requirements Defensive Controlling risks Setting risk limits Active Allocating risk Performance valuation Capital allocation , Strategic business decisions.
[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],Extreme Value Theory (EVT)
[object Object],[object Object],[object Object],[object Object]
EVT Theorem ,[object Object],[object Object],[object Object],[object Object],[object Object]
EVT Estimators ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],Stress testing
[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],How effective are VAR models? VAR and sub prime
Exceptions ,[object Object],[object Object],[object Object],[object Object]
What window? ,[object Object],[object Object],[object Object]
What models work best? ,[object Object],[object Object],[object Object],[object Object]
Problem on VAR cash flow mapping ,[object Object],[object Object],[object Object],[object Object],Annualized yield & volatility 3 Month 6 Month 1 Year Annualised yield 5.50 6.00 7.00 Volatility 0.06 0.10 0.20 Correlations between daily returns 3 Month 6 Month 1 Year 3 month 1.0 0.9 0.6 6 month 0.9 1.0 0.7 1 year 0.6 0.7 1.0
Solution ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution Cont… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution Cont… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution Cont… ,[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution Cont… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution Cont… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Solution Cont… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

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Value At Risk Sep 22

  • 1. Value at Risk By A V Vedpuriswar September 15, 2009
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  • 5. Problem What is VAR (90%) ? % Returns Frequency Cumulative Frequency - 16 1 1 - 14 1 2 - 10 1 3 - 7 2 5 - 5 1 6 - 4 3 9 - 3 1 10 - 1 2 12 0 3 15 1 1 16 2 2 18 4 1 19 6 1 20 7 1 21 8 1 22 9 1 23 11 1 24 12 1 26 14 2 27 18 1 28 21 1 29 23 1 30
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  • 10. Solution Weekly VAR ＝ (12,500) (√5) ＝ 27,951 Monthly VAR ＝ ( 12,500) (√20) ＝ 55,902 Semi annual VAR ＝ (12,500) (√125) ＝ 139,754 Annual VAR ＝ (12,500) (√250) ＝ 197,642
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  • 52. V A R Applications Passive Reporting risk Disclosure to shareholders Management reports Regulatory requirements Defensive Controlling risks Setting risk limits Active Allocating risk Performance valuation Capital allocation , Strategic business decisions.
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