Value at risk is an amount that an investor will lose in the worst-case scenario while making an investment decision. Since the risk is a factor that every investor considers in terms of losing something while investing, the closest estimation can be made by looking at the historic data.
For example, if an investor wants to assess the maximum value that he might lose by investing $500,000 in Company ABC shares in the month of June 2020 based on the historic performance of the same share in June 2019. For example, by relying on the historic data, the investor has 95% confidence that the returns will fall by 6%. This way the total value at risk will be $30,000 ($500,000 x -6%).
Why is it more difficult to estimate the value at risk for
Repeat the previous problem, only use Monte Carlo simulation.
The probability that the loss from a portfolio will be greater than
Suppose you enter into a bet with someone in which you pay
Interpret the following statements about value at risk so that they would
Excerpts from the disclosures on derivatives made by a large beverage manufacturer
Should researchers use real-world or risk-neutral default probabilities
Using the delta-approximation method and assuming a $10m investment
Explain the difference between value at risk and expected shortfall.
Explain how the value at risk (VaR) method can be
