February 2010

The many shades of crude oil – part i

Correlation describes the strength and direction of a linear relationship between two quantitative variables. In other words it is a measurement of the degree of association between two sets of numbers that describes how closely they track or are related to one another. Except for Crude Palm Oil the data used for commodities are cash…Read more

Value at Risk – Historical Simulation

Historical simulation is a non-parametric approach of estimating VaR, i.e. the returns are not subjected to any functional distribution. VaR is estimated directly from the data without deriving parameters or making assumptions about the entire distribution of the data. This methodology is based on the premise that the pattern of historical returns is indicative of…Read 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 more

Volatility trend analysis

Volatility trend analyses were carried out by calculating sixty day moving averages of daily SMA volatilities in the given look-back period. The daily SMA volatility has been calculated based on prior sixty return observations. The graphical depiction of the trend line shows the average volatility of the next sixty volatilities at a given point in…Read more