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Value At Risk (summation)

April 1, 2017

A VAR statistic had 3 components:

  1. a time period
  2. a confidence interval
  3. a loss amount (or loss percentage)

There are 3 ways to calculate it:

  1. Historical Method using a histogram
  2. Variance-Covariance Method assumes normal distribution
  3. Monte Carlo Simulation

Worst case is worse than VAR confidence interval predicts.


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