Portfolio Management (lvl 2) 3. value at risk (VaR)

  • value at risk (VaR) and its use in measuring and managing market risk. The three VaR approaches (parametric, historical simulation, Monte Carlo) along with the advantages and limitations of each are examined.
  • value at risk
    • three primary approaches to estimating value at risk
    • the primary advantages and limitations 
    • extensions of value at risk. 
  • the sensitivity measures used for equities, fixed-income securities, and options and also covers historical and hypothetical scenario risk measures. 
  • various applications and limitations of risk measures as used by different types of market participants. 
  • the use of constraints in risk management, such as risk budgeting, position limits, scenario limits, stop-loss limits, and capital allocation as risk management tools. 

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