In this post on value at risk we will start off with a data series for the USD-EUR Foreign currency exchange rate and see what a tool like Value at Risk can tell us about both the likely as well as the worst case movement for this exchange rate.
Risk management and derivative pricing concepts are closely interlinked. As practitioners we come across a wide range of issues that sit at the intersection of both subjects. An integrated skill building exercise that is aimed at professionals who deal with pricing, valuation, risk, policy and reporting issues related to structured fixed income and foreign exchange transactions.
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
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
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