In the previous post, we learned the algorithm to compute VaR using Monte Carlo Simulation. Let us compute VaR for one share to illustrate the algorithm.

We apply the algorithm to compute the monthly VaR for one stock. We will only consider the share price and thus work with the assumption we have only one share in our portfolio. Therefore the value of the portfolio corresponds to the value of one share.

The following assumptions are made:

Current share price | $20 |

Drift | 10% |

Volatility | 20% |

The attached spreadsheet shows the calculation of VaR using Monte Carlo Simulation.

Monte Carlo Simulation VaR for One Asset