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 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

## Portfolio volatility (vol)

The portfolio’s daily volatility taking into account correlations has been calculated using the formula: Where . a, b and c are the weights of the respective asset in the portfolio X, Y, and Z are the assets in the portfolio Variance (X) is the variance in X price/ rate returns, i.e. it is X’s volatility…Read more

## Correlation – Everything you ever wanted to know but were afraid to ask

Where n is the sample size is the measurement for the ith return observation of asset x is the mean of the return observations of asset x is the standard deviation of the return observations of asset x is the measurement for the ith return observation of asset y is the mean of the return…Read more

## And now for the China Factor – Euro, then oil, then gold…

China raises reserve requirements hinting at possible action to slow down its economy and Eurozone GDP growth rate figure disappoints. To the mix of news coming in on Tuesday, Wednesday and Thursday, this last bit of push caps the week for Euro. We now have a new powerful factor pushing oil, gold and other commodities…Read more

## Currencies and crude oil price outlook – End of quarter ending March 2010

After the action in Euro this week a number of outlook revisions for the European currency were released. The two most noteworthy were the Goldman and ANZ note on Euro and their end of year outlook. The common theme amongst both is the 1.30-1.35 level force and a hint of sub 1.30 level for Euro…Read more

## What does recent Euro volatility mean for oil price…

I think the snow storm has sort of dampened the impact of rising dollar and the EIA demand uptick played into this week. But if Euro continues to weakens and temperatures pick up later in February we should see a downward trend in oil. Reactions?

## Understanding Oil consumption demand drivers – step three

Slightly dated but still very relevant article by Alan Reynolds at CATO that explains where Oil consumption actually goes. The key point being made in by Alan in 2005 was don’t look at vehicular consumption of refined products, look at industrial production and usage driven by manufacturing, heating, farming and logistics. Alan also goes…Read more

## Dollar, Yen versus Euro, Gold and Oil

OilTrader at Darden predicts action in dollar and yen versus euro, gold and oil on Wednesday, Thrusday and Friday (10th, 11th and 12th) February post the scheduled EU meeting on Greece, Spain and Portugal.