Recent Articles

Calculating VaR Using Historical Simulation

The fundamental assumption of the Historical Simulations methodology is that you base your results on the past performance of your portfolio and make the assumption that the past is a good indicator of the near-future.

The below algorithm illustrates the straightforwardness of this methodology. It is called Full Valuation because we will re-price the asset or the portfolio after every run. This differs from a Local Valuation method in which we only use the information about the initial price and the exposure at the origin to deduce VaR.

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Value at Risk (VaR)

Define the concept of Value-at-Risk (VaR) Value-at- Risk (VaR) is a general measure of risk developed to equate risk across products and to aggregate risk on a portfolio basis. VaR is defined as the predicted worst-case loss with a specific confidence level (for...

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