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Integrated Value-at-Risk Modeling

S. Benninga
Z. Wiener

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To demonstrate some useful features of Mathematica's design, we turn to Benninga and Wiener's short paper on Value-at-Risk (VaR), the modern risk-measuring index. VaR is defined as the lowest quantile of the potential losses that can occur within a given portfolio during a specific time period. The time period T and the confidence level q are the two major parameters, which are chosen carefully and are dependent upon the goal of the risk management (regulatory reporting, corporate risk management, etc.). For example, suppose that a portfolio manager has a daily VaR equal to $1 million at 1%. This means that, assuming normal market conditions, there is only one chance in a hundred that there will be a daily loss bigger than $1 million. While this problem can be easily stated, finding a solution can frequently be computationally difficult.

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*Value-at-Risk (VaR)   [in Articles]

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VaRmodeling.nb (72.1 KB) - Mathematica Notebook