Value at Risk

What You Will Learn

• 1 Define Value at Risk and understand its role in financial risk management.
• 2 Explore statistical concepts essential for VaR calculation including distributions and volatility.
• 3 Learn the parametric (variance-covariance) approach to computing VaR.
• 4 Apply historical simulation techniques to estimate VaR from past data.
• 5 Implement Monte Carlo simulation methods for complex portfolios.
• 6 Understand how VaR applies to multi-asset portfolios and diversification effects.
• 7 Evaluate VaR models through backtesting and validation procedures.
• 8 Incorporate stress testing and scenario analysis to complement VaR.
• 9 Recognize limitations of VaR and alternative risk measures like Expected Shortfall.
• 10 Navigate regulatory frameworks (Basel III, SEC) and compliance requirements.