# Monthly Archives: March 2010

## Risk Frameworks and applications

I never thought that I would ever get round to writing a book; much less three in less than a twelve month period. Such is life. So after Reboot and after Understanding Commodity Risk, comes Risk: Applications and Frameworks. Just finishing the final draft before

## Three new courses this week

I ran two workshops in Dubai and Abu Dhabi last week on derivatives and treasury risk management. Three new related courses in these two areas have now been uploaded as master classes. They are: Master Class: Calculating Value at Risk Master Class: Derivative products The

## Calculating Value at Risk Excel

Calculating Value at Risk Excel Our second  course on Risk Management takes a deeper look at the calculation and the methods behind Value at Risk (VaR). We start with a review of calculation methods including VaR by variance-covariance, VaR by historical simulation and VaR by Monte

## Master Class: Calculating Value at Risk (VaR): Final steps

VaR Approach Specific Steps Calculating Variance-Covariance (VCV) Value at Risk (VaR) This method assumes that the daily returns follow a normal distribution. From the distribution of daily returns we estimate the standard deviation (?). The daily Value at Risk (VaR) is a function of the

## Master Class: Calculating Value at Risk (VaR): First Steps

Methodology Setting the Scene Sample Portfolio Our sample portfolio that we will use for calculating Value at Risk (VaR) consists of the following 4 items: 100 shares of OGDC 5 barrels of Crude Oil 1 foreign exchange denominated asset with market value of USD 10

## Calculating Value at Risk (VaR): VaR Methods

All methods have a common base but then diverge in how they actually calculate Value at Risk (VaR). They also have a common problem in assuming that the future will follow the past. This shortcoming is normally addressed by supplementing any VAR figures with appropriate sensitivity analysis and/or stress testing. In general the VAR calculation follows five steps

## Master Class: Calculating Value at Risk (VaR): Introduction

Value at Risk (VaR) One of the most pertinent questions in risk management has been: How much do you stand to lose, over a certain period and with a certain probability? The most common answer to this question today is Value at Risk, a risk

## Master Class: Derivative Products: Swaps

Swaps This is an agreement between two parties, usually institutions, to exchange cash flows according to a predefined calculation at some specified periodic intervals in the future. The calculation may be based on the future value of interest rates, foreign exchange rates or some other

## Master Class: Derivative Products: Futures

Futures Contracts These are contracts where the buyer/ holder of the contract agrees to purchase while the seller / writer of the contract agrees to deliver a specified asset at some future specified time (the exact delivery date is not specified only the delivery month)

## Derivative Products: Forwards

These are contracts where the buyer/ holder of the contract agrees to purchase while the seller / writer of the contract agrees to deliver a specified asset at some future specified time (the maturity date) for an exercise/ delivery price that is fixed today. Both

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