CS代考 PowerPoint Presentation

PowerPoint Presentation

Chapter 28: Value at Risk (VaR)

Copyright By PowCoder代写 加微信 powcoder

Value at risk (VaR)
Measures the worst expected loss
Under normal market conditions or stressed conditions
Over a specified time interval
At a specific confidence level
“VaR answers the question: how much can I lose with x% probability over a pre-set horizon?” (JP Morgan, RiskMetrics—Technical Document)

Simple example
Portfolio value: $100 million
Return distribution: mean = 20%, sigma = 30%
What is the probability of losing more than $20 million by year-end?

To answer the question (probability of ending up with less than $80), you have to all the probabilities below the red line on the y-axis.

This means we need to look at the Cumulative Normal distribution.

Cell B6: Cumulative Normal Distribution

Initial investment 100
Probability that
portfolio worth less
than cutoff
9.12%<-- =NORMDIST(B5,(1+B2)*B4,B4*B3,TRUE) Portfolio value Data table header: =NORMDIST(B5,(1+B2)*B4,B4*B3,FALSE) PROBABILITY OF YEAR-END PORTFOLIO VALUE 0.0000.0020.0040.0060.0080.0100.0120.014020406080100120140160180200220240End-of-Year Portfolio Value /docProps/thumbnail.jpeg 程序代写 CS代考 加微信: powcoder QQ: 1823890830 Email: powcoder@163.com