Three approaches to value at risk (VaR)

This is a brief introduction to the three basic approaches to value at risk (VaR): Historical simulation, Monte Carlo simulation, Parametric VaR (e.g., delta normal)

Category:

Education

Tags:

• finance
• risk
• var

[jimmymac91]

Does anyone else think he sounds like kermit the frog?

[bionicturtledotcom]

@jimmymac91 It's not easy being green (but i can see how you confuse a turtle with a frog, easy mistake)

[OneHourDesign]

Question: who determines the mathematica models used in Montecarlo simulation? Are they random?

[riddd9]

Thanks! That is helpful.

[Creolebway]

@3king3kong3 you have to calculate the z value or t value of a one tailed test. google: statistics z value or t vallue. i havent calculated it but thats how you do it so i cant say if 98.2 is correct. you need 2 thisngs. std dev. mu which is the sample mean. so your forluma is z= X- mu / n (number of sample) times sq rt. sigma(std. deviation)

[Creolebway]

How sure you are about the .95 percent depends on your P value which should be discussed. how sure is your 95 percent. 10 percent sure.. ? 50 percent?

[Creolebway]

actually.. this data is pretty normally distributed.. more so than many others. and the normal dist. at 2:32 is more unrealistic in real life.

[Creolebway]

@khanpreston1. a .95 percent interval means that you , the researcher, is .95 percent sure that your test expected value will lie within the area of interest.. therefore you are then .05 percent unsure that your study is true. distribution mean is the "average of the data" so when you see a bell curve, the data is normally distributed ,(on a sactter plot if you want to use excel and plot some points)

[Creolebway]

so when calculating a 95 percent interval .. you use the 1.96 z value for a critical point and then your test point. my question is: if you used the T value 95 percent interval(1 tailed test of course) the dispersion is much greater so why would someone that is profit bound, want to calculate a 1 tailed z value when they .95 percent interval would be more favorable with a t test?

[mourantell]

@voiceofutube

It is true. It doesn't take into consideration how big losses would be realized at the end of the tails. You could make +/- 0,000001 bucks 99% of the time and lose a fortune 1% of the time and it would say it's ok.

[voiceofutube]

@sysopkc I think. you are supporter of Nassim Nicholas Taleb's view which he described in his book "Black Swan"...?