# var

1. ### VaR versus standard deviation

Hello @David Harper CFA FRM , sorry to bother you again, but I did not know where to put this question about Meissner's Example 1.2 of VaR for a two-asset portfolio. (Should I create a new thread for questions like this in the future?) On the table, the 'Deviate' is written as 2.326. However...
2. ### 5% VaR of Normal P/L

Dear @David Harper CFA FRM I came across the following question in the Schweser notes to Market Risk book: It is stated that correct answer is D but I think it is A, could you please help me? Thanks !
3. ### VaR favors short horizons FRM 1

Dear all, I read the summary of Bionic. For chapter 1, you stated that VaR favors short horizons but I could not find this information in GARP’s material. Could you explain this for me ?
4. ### Calculating portfolio VaR after adding an option

Hi, I have a 2 asset portfolio evenly weighted of stock A and stock B. If I purchase a long put, written on just stock A, with a delta of -0.536, how would I calculate the appropriate option sizing and how much it would minimize my portfolio VaR? Do I use the component VaR? Does the hedge...
5. ### T9. R63. P2: Describe the challenges associated with VaR measurement as portfolio size increases.

@David Harper CFA FRM Hey David. I am having difficultly in understanding the formula for calculating the Covariance of Assets with the Portfolio i.e. Cov(i,p). As per your example in the study notes, you have shown the formula for COV(euro, portfolio) which is confusing. What if the...
6. ### Market risk internal model input in capital adequacy ratio

Dear reader, I am currently working on CAR and I am wondering how I can input my market risk VAR into the calculation. Essentially, my question is regarding the time horizon of CAR versus Delta normal VaR. Assuming a 1 day VaR output from the delta normal model, How does it fit into the CAR? My...
7. ### Calculating Value at Risk need help

Hey for school i have to calculate the VaR but I am unable to find the right calculation, can anyone help me solve it? "Suppose an investor wants to take 500 shares of Tesla in a pre-portfolio. The price is \$ 800.00 per share The term of this position is 1 day. The daily volatility is: 2%...
8. ### Clarifying Understanding for Ch 4 - Backtesting VAR

Hi, I have the following understanding - Does this make sense or am I missing something here? We may choose to accept a 99% VAR model with 95% or 99% (or any other) level of confidence. Hence, using Jorian's example from book, assuming we use a 99% VAR (i.e. p=.01), over 250 days (i.e. T=250)...
9. ### Carol Alexander | Market Risk Analysis, Value at Risk Models (Volume IV)

Value-at-Risk Models forms part four of the Market Risk Analysis four-volume set. Building on the three previous volumes this book provides by far the most comprehensive, rigorous and detailed treatment of market VaR models. It rests on the basic knowledge of financial mathematics and statistics...
10. ### YouTube T4-01: Three approaches to value at risk (VaR) and volatility

The three approaches are 1. Parametric; aka, analytical; 2. Historical simulation; and 3. Monte Carlo simulation (MCS). The parametric approach assumes a clean function, the other two work with messy data. Historical simulation is betrayed by a histogram, MCS is betrayed by a random number...
11. ### Inconsistent Scaling in VaR/Standard Deviation for 2+ Assets/Portfolio

I've noticed that when calculating VaR/variance/std. dev of 2+ assets (or portfolio), sometimes the correlation/covariance is included, and sometimes it's not. I.e. for standard deviation of 2 assets: sqrt[w(1)^2*variance(1) + w(2)^2*variance(2)+2*w(1)*w(2)+covariance(1,2)] where (1) = asset 1...
12. ### YouTube T1-5 What is the (Basic) Historical Simulation approach to value at risk (VaR)?

Basic historical simulation sorts the actual loss history and, for example, the 95th HS VaR is the 6th worst out of 100 observations. Here is David's XLS: http://trtl.bz/frm-t1-5-hs-var
13. ### YouTube T1-2 What is value at risk (VaR)?

Value is risk is just a statistical feature of probability distribution (the hard part is specifying the probability distribution): VaR is the quantile associated with a selected probability; i.e., what's the worst that can happen with some level of confidence? See David's XLS here...
14. ### P2.T8.710. Portfolio value at risk (VaR) and surplus at risk (SaR)

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
15. ### Is Var procyclical or countercyclical

As per logic if there is economic boom var has to be low and high if there is bust.which implies it is countercyclical. However if time varying volatility is incorporated Var tends to be procyclical Can some one explain why?
16. ### P2.T5.703. VaR backtest and VaR mapping

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
17. ### P2.T5.702. Nonparametric value at risk (VaR)

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
18. ### P2.T5.701. Value at risk (VaR) and expected shortfall (ES)

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
19. ### P2.T5.700 Value at risk (VaR) basics

Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
20. ### P2.T6.701. Unexpected loss and return on risk-adjusted capital (RARORAC) (De Laurentis)

Learning objectives: Explain expected loss, unexpected loss, VaR, and concentration risk, and describe the differences among them. Evaluate the marginal contribution to portfolio unexpected loss. Define risk-adjusted pricing and determine risk-adjusted return on risk-adjusted capital (RARORAC)...