Dear readers,
I watched the following video from David Harper several times and I end up with a question.
I would like some explanation about the column VaR(%). It is said to come from those risk factor respective VaRs (eg. 4.5381% for the Spot FX risk factor).
In my understanding these VaR numbers come from the delta normal methodology applied to a portfolio of assets (eg. 4.5381% for a portfolio of spot FX rates). In which case, how can we apply this percentage to the EUR spot? And how we can have different VaR % for the interest rate long EUR and short USD? Are these percentage stand alone VaR%? marginal VaR%?
Why is the interest rate VaR in %? Most of the example I can see about interest rate VaR shows PV01 risk factors which is in absolute amount.
I would be please to get your explanation so that I could have a better understanding of the forward currency VaR.
delal
I watched the following video from David Harper several times and I end up with a question.
In my understanding these VaR numbers come from the delta normal methodology applied to a portfolio of assets (eg. 4.5381% for a portfolio of spot FX rates). In which case, how can we apply this percentage to the EUR spot? And how we can have different VaR % for the interest rate long EUR and short USD? Are these percentage stand alone VaR%? marginal VaR%?
Why is the interest rate VaR in %? Most of the example I can see about interest rate VaR shows PV01 risk factors which is in absolute amount.
I would be please to get your explanation so that I could have a better understanding of the forward currency VaR.
delal
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