9887

Value at Risk

Value at Risk (VaR) and volatility are the most commonly used risk measurements. VaR is easy to calculate and can be used in many fields. VaR is defined as the sum of the data mean and the product of data volatility and an appropriate quantile of distribution. This quantile indicates the confidence level of the result. This interpretation of VaR assumes that the data is normally distributed; however the calculation works in any setting.

THINGS TO TRY

SNAPSHOTS

  • [Snapshot]
  • [Snapshot]
  • [Snapshot]

DETAILS

Interpretation of VaR
Suppose the VaR over a one-day holding period is 1000 (the VaR is expressed as an absolute number amount) at a confidence level of 99%. That means that 99% of the time (i.e., 99 out of 100 trading days), a maximum loss of 1000 is expected once and the second largest loss in 100 days is expected to be no more than 1000. For the worst 1% of days the minimum loss of 1000 is expected.
The VaR for a -long period (e.g. days) is calculated as the product of one period VaR (with mean zero) and , where is the data mean.
    • Share:

Embed Interactive Demonstration New!

Just copy and paste this snippet of JavaScript code into your website or blog to put the live Demonstration on your site. More details »

Files require Wolfram CDF Player or Mathematica.









 
RELATED RESOURCES
Mathematica »
The #1 tool for creating Demonstrations
and anything technical.
Wolfram|Alpha »
Explore anything with the first
computational knowledge engine.
MathWorld »
The web's most extensive
mathematics resource.
Course Assistant Apps »
An app for every course—
right in the palm of your hand.
Wolfram Blog »
Read our views on math,
science, and technology.
Computable Document Format »
The format that makes Demonstrations
(and any information) easy to share and
interact with.
STEM Initiative »
Programs & resources for
educators, schools & students.
Computerbasedmath.org »
Join the initiative for modernizing
math education.
Step-by-step Solutions »
Walk through homework problems one step at a time, with hints to help along the way.
Wolfram Problem Generator »
Unlimited random practice problems and answers with built-in Step-by-step solutions. Practice online or make a printable study sheet.
Wolfram Language »
Knowledge-based programming for everyone.
Powered by Wolfram Mathematica © 2014 Wolfram Demonstrations Project & Contributors  |  Terms of Use  |  Privacy Policy  |  RSS Give us your feedback
Note: To run this Demonstration you need Mathematica 7+ or the free Mathematica Player 7EX
Download or upgrade to Mathematica Player 7EX
I already have Mathematica Player or Mathematica 7+