Example of traditional Value at Risk
Illustrates an example of traditional Value at Risk by Artzner et al?
Expert
Artzner et al. (1997) provide a simple example of traditional VaR that violates this, and exemplifies perfectly the problems of measures which are not coherent. Portfolio X contains only a far out-of-the-money put along with one day to expiry. Portfolio Y contains only a far out-of-the-money call with one day to expiry. Let us assume that every option has a probability of 4 percent of ending up in the money. For all options individually, at the 95 percent confidence level the one-day traditional VaR is efficiently zero. At this instant put the two portfolios together and there is a 92 percent chance of not losing anything, 100 percent less two lots of 4 percent. Therefore at the 95 percent confidence level there will be an important VaR. Putting the two portfolios together has in this illustration increased the risk.
What is the role of the derivatives of Serial Autocorrelation?
Explain the programme of study of finite differences.
Explain the term REGARCH as of the GARCH’s family. Answer: REGARCH: It is a Range-based Exponential GARCH. It models the low to high ran
Explain finite-difference method in finance.
Describe necessary condition for a fixed-for-floating interest rate swap to be possible?For fixed-for-floating interest rate swap to be possible it is essential for a quality spread differential to be present. Generally, the default-risk premiu
How is the risk into portfolio measured in Crash Metrics?
Explain Capital Asset Pricing Model (CPM).
Letters of Credit: It is a binding document which a buyer can request from his bank in order to pledge that the payment for goods will be moved to the seller. Principally, a letter of credit provides the seller reassurance that he will obtain the paym
Normal 0 false false
What are the Forward and Backward Equations?
18,76,764
1942831 Asked
3,689
Active Tutors
1419665
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!