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    VaR Settings

    Uploaded by

    shri.suyash

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    VaR Settings

    Uploaded by

    shri.suyash
    4 views4 pages

    Copyright

    © © All Rights Reserved

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    Copyright:

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    4 views4 pages

    VaR Settings

    Uploaded by

    shri.suyash

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Overview

    The VaR Settings form allows the customization of parameters crucial for VaR Calculation.
    These include:

    Confidence level
    Holding days
    Deal filter for portfolio to be assessed
    Variance/Covariance type (for Parametric method)
    Simulation number and PCA precision percent (for Monte Carlo Simulation method,
    among others)

    Ensuring the proper configuration of this form is vital for the accurate execution of Value at
    Risk (VaR) analysis.

    VaR Settings Form Example

    Column Names
    1. ID

    System generated ID for the VaR Settings

    2. Name

    Selections: User Input (Free Form Text)


    Explanation: Name of the VaR Setting

    3. Deal Filter

    Selections: Drop-down menu to choose from all “Deal Filters” in the system.
    Explanation: Specifies the data or set of deals for VaR analysis, options include:
    All deals in the system
    Entire Legal Entity
    All Business Units
    Some Business Units
    All Portfolios
    Some Portfolios
    Deal Types
    Deal Numbers
    Traders
    Note: Official VaR needs to be run on all the books.

    4. Variance Covariance

    Selections: Drop-down menu to choose from all “Variance Covariance Settings” in


    the system.
    Explanation: Variance Covariance Matrix is needed for the calculation of Parametric
    and Monte Carlo VaR.

    5. Holding Days

    Selections: User Input (Free Form Text)


    Explanation: Input the number of days to hold the position; the most used option is
    1-Day.

    6. Confidence Level

    Selections: User Input (Free Form Text)


    Explanation: Specify the confidence level for VaR; the most used option is 95% or
    0.95.

    7. Calc Parametric VaR?

    Selections:
    Checked – Calculate Parametric VaR
    Unchecked – Do not calculate Parametric VaR

    8. Calc Monte Carlo VaR?


    Selections:
    Checked – Calculate Monte Carlo VaR
    Unchecked – Do not calculate Monte Carlo VaR

    9. Monte Carlo Simulations

    Selections: User Input (Free Form Text)


    Explanation: Defines the number of correlated random price shocks that need to
    be computed for the calculation of Monte Carlo VaR. The higher the number of
    simulations, the better the result is. However, the higher number of simulations
    means that more computational power is needed.

    10. PCA Precision

    Selections: User Input (Free Form Text)


    Explanation: The precision for Principal Component Analysis. The PCA precision,
    which the user is allowed to define, is the threshold for defining principal
    components. For example, if the PCA precision is 95%, the risk factors, which
    contribute 95% variance, are considered principal components.

    11. Option Valuation Method

    Selections: Delta Gamma Approximation


    Explanation: Indicates the utilization of the Delta Gamma Approximation for
    computing PnL for all option deals.

    12. Calc Historical VaR?

    Selections:
    Checked – Calculate Historical VaR
    Unchecked – Do not calculate Historical VaR

    13. Historical VaR Look Back Days

    Selections: User Input (Free Form Text)


    Explanation: Defines number of good business days to retrospectively consider for
    loading prices in the Historical VaR calculation.

    14. Historical VaR Lambda

    Selections: User Input (Free Form Text)


    Explanation:
    If Historical VaR Lambda = 1; then all Historical Prices are treated with equal
    weights.
    If Historical VaR Lambda < 1; then the most recent Historical Price is given the
    maximum weight, with decreasing weights as we move back in the historical
    window.

    15. Report Conditional VaR?

    Selections:
    Checked – Calculate and Report Conditional VaR
    Unchecked – Do not calculate and Report Conditional VaR
    Explanation:
    Conditional VaR represents the average of PnL values exceeding VaR in the
    PnL Distribution.

    16. Report Curve VaR?

    Selections:
    Checked – Calculate and Report VaR at Curve Level
    Unchecked – Do not calculate and Report VaR at Curve Level
    Explanation:
    Provides the VaR number at Curve levels.

    17. Reporting Currency

    Selections: Drop-down menu to choose from all available currencies in the system.
    Explanation: Specifies the currency used for reporting the VaR number.

    18. Drill Down Attributes

    Selections: Drop-down menu to choose from various options such as Book, Trader,
    etc.
    Explanation: Provides the capability to compute VaR at Book Level or Trader Level.

    ® 2021 Enuit LLC. All rights reserved.


    Send feedback on this topic to Enuit LLC.

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