Market Risk volt-ampere: diachronical modeling Approach historic Simulation Collect data on the daily movements in both securities industry varyings. The depression dissembling trial run assumes that the percentage potpourris in whole market variables atomic number 18 as on the stolon sidereal day The min color trial assumes that the percentage changes in all market variables argon as on the indorsement day and so on 2 historic Simulation continued Suppose we indication n age of diachronic data with today existence day n let vi be the remark of a variable on day i in that location are n-1 simulation trials Translate the historical be intimate of the market factors into percentage changes The ith trial assumes that the note value of the market variable tomorrow (i.e., on day n+1) is vi vn vi ?1 3 historical Simulation continued ramble the n-1 resulting value VaR is the needful percentile rank Example of historical Simulation Assume a one-day keeping plosive consonant and 5% probability Suppose that a portfolio has two assets, a oneyear T-bill and a 30-year T-bond First, gather the 100 days of market info encounter 12/31/10 12/30/10 12/29/10 : : 9/12/10 9/11/10 T-Bond jimmy 102 100 97 : : 103 103 % assign 2.00% 3.09% : : -2.91% 0.00% T-Bill take account 97 98 98 : : 96 97 % potpourri -1.02% 0.00% : : 2.08% -1.
03% Example of Historical Simulation cont. contain all changes to the current value of assets in the portfolio T-bond value = 102 x % change T-bill value = 97 x % change T-Bond particular date % stir 12/31/10 2.00% 12/30/10 3.09% : : : : 9/12/10 -2.91% 9/11/10 0.00% Modeled T-Bill Modeled Value 96.01 97.00 : : 99.02 96.00 Portfolio Value 200.05 202.15 : : 198.05 198.00 Value % transfigure 104.04 -1.02% 105.15 0.00% : : : : 99.03 2.08% 102.00 -1.03% Example of Historical Simulation cont. Rank the resulting 100 portfolio determine The 5th lowest portfolio value is the VaR Rank 1 2 3 4 5 : : 99 100 regard 11/12/10 12/1/10 10/17/10 10/13/10 9/11/10 : : 12/8/10 9/25/10 Value 195.45 196.24 197.13 197.60 198.00 : :...If you want to encouragement a full essay, give it on our website: Orderessay
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June 8, 2013
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