［2008］Topic 32: VAR Methods相关习题 simulation, determine, valuation, expected, complex

Baran

 

AIM 2: Explain how the full valuation is supported by the Monte Carlo and historical simulation approach, respectively.

 

1、Local-valuation methods used to determine changes in portfolio value are appropriate when the portfolio:

A) has substantial option-like exposures.

B) has numerous complex risk factors.

C) has few option-like exposures.

D) changes are expected to occur over a long-term horizon.

Baran

 

The correct answer is C

Local-valuation methods are a first approximation to changes in overall portfolio value given changes in linear-related risk factors. The greater the nonlinear sensitivity of the portfolio (incurred by option-like exposures), or the more complex the sensitivity to risk factors, the less appropriate the application of the local-valuation method becomes.

Baran

 

AIM 3: List the advantages and disadvantages of using the delta-normal model, the historical simulation method, and the Monte Carlo simulation method for VAR calculations.

1、The delta-normal method is:

A) analytical. 

B) stochastic.

C) nonlinear.

D) called a Greek method.

Baran

 

The correct answer is A

 

The delta-normal method is analytical, because it describes VAR with a closed-form solution.

Baran

 

2、In a historical simulation method, the correlation among assets is:

A) embedded in the asset price changes.

B) ignored.

C) scaled by the gamma factor.

D) fixed at the current correlations.

Baran

 

The correct answer is A

 

In a historical simulation method, the correlation among assets is embedded in the asset price changes. One criticism of this method is that the correlations among assets are specific for the historical time period in which the prices were gathered and may vary for other periods.

Baran

 

AIM 4: Compare the delta normal, historical simulation, and Monte Carlo simulation methods, and explain their appropriate uses.

 

1、One advantage of the Monte Carlo simulation approach over the historical method when calculating VAR is the simulation approach:

A) makes better use of computing power.

B) takes advantage of the normal distribution.

C) equates past performance to future results.

D) incorporates flexibility in modeling price paths.

Baran

 

The correct answer is A 

 

The Monte Carlo approach allows for whatever relationships the VAR modeler would like to take into account. It is the most flexible method for generating VAR.

Baran

 

2、When would a Monte Carlo simulation be preferable to a historical simulation?

A) Historical data does not produce favorable results.

B) There is only a small amount of historical data.

C) Insufficient computer capacity.

D) A large amount of historical data is available.

Baran

 

The correct answer is B

 

Historical simulation is most applicable if there is a large sample of past returns to draw from. The computer capacity necessary for each is about the same, and certainly the occurrence of unfavorable results is no reason to reject historical simulation.