Value at Risk particular, anything, 2011, provides

Howd

I just want to check whether:

(a) the CBOK requires; and

(b) the curriculum provides the method and assumptions for;

the calculation of 10 per cent yearly VAR of a particular risk exposure given data on 1 per cent daily VAR of that risk exposure. I am unable to find anything in the curriculum so far.



Edited 1 time(s). Last edit at Thursday, June 9, 2011 at 08:08AM by stevenevans.

liangfeng

Yes, it does.

Take the daily data and turn that into annual, bing bang boom. Daily st dev x sqrt 250

bodhisattva

I dont think they had any example similar to this...i would say this is pretty tricky

oneboy

kh.asif Wrote:
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> I dont think they had any example similar to
> this...i would say this is pretty tricky

Exactly -- although I get the logic, I don't think its intuitive. And where does it say about the mean reverting value? The curriculum has no examples or sample questions or blue box examples on anything similar. Quite tricky.

liangfeng

cpk123 Wrote:
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> level of significance only affects the number used
> - 1.645 vs. 1.96 vs. 2.33
>
> an assumption they mention in the curriculum is
> that if expected return had a mean reverting value
> of 0 - you could just do it with the std.
> deviation.
>
> daily return std deviation = x
> annual return std deviation = x*sqrt(250).
>
> as blanders above has stated.


+2 Not tricky.

Valores

Ok. My question to you guys saying its not tricky is -- are you'll drawing from you from the CBOK or practical experience or elsewhere? I studied the curriculum, did samples, mocks and what not -- but haven't come across a question like this at all.

Analyze_This

it is a read between the lines thing in the curriculum on a particular left hand side page...

that is all I remember ... can look it up later when I have the textbook to provide with the reference. where it talks about the mean reverting value of 0, and also goes on to state in no uncertain terms that using a mean value of 0 - is a more CONSERVATIVE VAR estimate -- since when you use a non-zero value - your VAR value will be a lower number.

e.g. say mean = 10, stddev = 10, and 1% var
10 - 10(2.33) = -13.33 --> VAR of 13.33

if mean = 0 --> VAR = 23.33 -- so you are more conservative

CP

Zestt

Well! If its in the schweser I should go bury myself.

pennyless

good thing that my common sense clicked worked in the exam...i guess all those school years where I checked the answer first and calculated backwards to do the math did help after all..

lcai

don't forget to multiply by the value of the portfolio in your VaR calculation.