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Monte Carlo Simulation - Example | Finance Train

Value at Risk

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Value at Risk (VaR)

Analytical Approach to Calculating VaR (Variance-Covariance Method)

Calculating VaR Using Historical Simulation

Monte Carlo Simulation - Example

Calculating VaR using Monte Carlo Simulation

Application of VaR to Non-Market Areas

Three Methodologies for Calculating VaR

Monte Carlo Simulation - Example

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.

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