Value at Risk – Methods – Variance Covariance

This method assumes that the daily returns follow a normal distribution. From the distribution of daily returns we estimate the standard deviation (σ). The daily VaR is simply a function of the standard deviation and the desired confidence level. For example, at the 99% confidence level the VaR is equal to 2.33 × σ. To…Read moreRead more

Value at Risk – VaR

VaR is a market risk measurement approach that uses the statistical analysis of historical market trends and volatilities to estimate the likelihood that a given portfolio’s losses will exceed a certain amount. It measures the largest loss likely to be suffered on a portfolio position over a holding period (usually 1 to 10 days) with…Read moreRead more