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Value at Risk Exercises

- The portfolio consists of 100 troy ounces of gold and 1000 barrels of WTI crude oil. - Using the variance-covariance method to calculate value at risk (VAR), the analysis shows a daily standard deviation of 1.1228% for the portfolio. - With a 99% confidence level, the daily VAR is 2.6119%, meaning there is a 1% chance of losing more than this amount on any given day. - For a 10 day holding period, the portfolio VAR increases to 7.6449%, indicating higher risk over a longer time frame.

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65 views6 pages

Value at Risk Exercises

- The portfolio consists of 100 troy ounces of gold and 1000 barrels of WTI crude oil. - Using the variance-covariance method to calculate value at risk (VAR), the analysis shows a daily standard deviation of 1.1228% for the portfolio. - With a 99% confidence level, the daily VAR is 2.6119%, meaning there is a 1% chance of losing more than this amount on any given day. - For a 10 day holding period, the portfolio VAR increases to 7.6449%, indicating higher risk over a longer time frame.

Uploaded by

MeeroButt
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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Bin Frequency Cumulative %

-0.01102 1 4.76%
-0.00728 2 14.29%
-0.00353 3 28.57% -----> %the most risk that you might losses
0.000214 8 66.67%
More 7 100.00%
total 21 among 21 days of trading days, we face 3 days that we might loss

so, among 21 trading days, there is a 3 days possibility that we might suffer losses, and the percentage of loss that we suffer is
the var for 21 trading days is 28,57% out of 21 days, there are 3 days a loss can occur.

Histogram
9 120.00%
8
100.00%
7
6 80.00%
5
60.00%
4
Frequency

Frequency
3 40.00%
Cumulative %
2
20.00%
1
0 0.00%
21 46 47 05 e
or
2 20 6 92 3 16 3 63 M
1 02 7 27 0 35 0 21
1 0 .0 00
.0 .0 -0 0.
-0 -0

Bin
we might loss

e of loss that we suffer is 28,57%

Frequency
Cumulative %
Date Price Daily Returns
11/1/2016 1.1056
11/2/2016 1.1097 0.37015%
11/3/2016 1.1105 0.07207%
11/4/2016 1.1138 0.29672%
11/7/2016 1.104 -0.88376%
11/8/2016 1.1026 -0.12689%
11/9/2016 1.091 -1.05763%
11/10/2016 1.0893 -0.15594%
11/11/2016 1.0856 -0.34025%
11/14/2016 1.0737 -1.10222%
11/15/2016 1.0721 -0.14913%
11/16/2016 1.069 -0.28957%
11/17/2016 1.0626 -0.60049%
11/18/2016 1.0588 -0.35825%
11/21/2016 1.063 0.39589%
11/22/2016 1.0626 -0.03764%
11/23/2016 1.0559 -0.63253%
11/24/2016 1.0554 -0.04736%
11/25/2016 1.0587 0.31219%
11/28/2016 1.0615 0.26413%
11/29/2016 1.0648 0.31040%
11/30/2016 1.0648 0.00000%
Portfolio data

GOLD -----> onlygold.com The portfolio consist of : 100 troy ounce of gold
Goldspot prices for nov 1 - 22 2016 :1000 barrels of WTI Crude O

OIL ----> www.eia.gov VAR using Variance Covariance (VCV) method has 2 approaches:
WTI Crude Oild Spot Price a. SMA (Simple Moving Average)
for nov 1 - 22 2016 b. EWMA (Exponential Weighted Moving Average)

SMA Calculation:
GOLD OIL 1. SMA daily volatility ---> STANDARD DEVIATION
Quantity 100.00 1,000.00 2. SMA daily VAR
Price 1,214.25 47.48 3. J-day holding SMA VAR ----> the number of day of holding
Market Value 121,425.00 47,480.00 4. Portfolio holding SMA Var
Weight 71.890% 28.110%

DATA RETURN
Date GOLD WTI (OIL) GOLD WTI (OIL) Portfolio
11/1/2016 1288.45 46.66 FX methodold method
11/2/2016 1303.75 45.32 1.180% -2.914% 0.030% 0.030% 0.030%
11/3/2016 1301 44.66 -0.211% -1.467% -0.564% -0.564% -0.564%
11/4/2016 1302.8 44.07 0.138% -1.330% -0.274% -0.274% -0.274%
11/7/2016 1283.05 44.88 -1.528% 1.821% -0.586% -0.586% -0.586%
11/8/2016 1282 44.96 -0.082% 0.178% -0.009% -0.009% -0.009%
11/9/2016 1281.4 45.2 -0.047% 0.532% 0.116% 0.116% 0.116%
11/10/2016 1267.5 44.62 -1.091% -1.291% -1.147% -1.147% -1.147%
11/11/2016 1236.45 43.39 -2.480% -2.795% -2.569% -2.569% -2.569%
11/14/2016 1213.6 43.29 -1.865% -0.231% -1.406% -1.406% -1.406%
11/15/2016 1226.95 45.86 1.094% 5.767% 2.408% 2.408% 2.408%
11/16/2016 1229.2 45.56 0.183% -0.656% -0.053% -0.053% -0.053%
11/17/2016 1226.75 45.37 -0.200% -0.418% -0.261% -0.261% -0.261%
11/18/2016 1211 45.69 -1.292% 0.703% -0.731% -0.731% -0.731%
11/21/2016 1214.25 47.48 0.268% 3.843% 1.273% 1.273% 1.273%
11/22/2016 1212.25 -0.00165
11/23/2016 1185.35 -0.02244
11/25/2016 1187.7 0.001981
11/28/2016 1187 -0.00059
11/29/2016 1186.55 -0.00038

1. SMA Daily Volatility 3. J-DAY holding VaR If we invest inthis portfolio, t


Portfolio Holding period 10 and the most risk that we m
1.1228% 8.2596%
2. Daily VAR 99%
2.6119%
price in NoV 22, 2016
: 100 troy ounce of gold ----> 1212.25
:1000 barrels of WTI Crude Oil ---> 47.48

hod has 2 approaches:

DARD DEVIATION

number of day of holding

1. Daily SMA Volatility


STDV 1.0392% 2.30666%
GOLD OIL

when you are trading in gold, we have 1,0392% of Value at Risk everyday
when you are trading in oil, we have 2,3066% of Value at risk daily

2. DAILY VAR using SMA


set the confidence level first
with
Convidence level 99%
2.4175% 5.3661%
GOLD OIL
if everday you trade Gold with daily risk is 1,0392%, the most risk that you might get is 2,4175%)
if everyday you trade oil with daily risk is 2,3066%, the most risk that you might get is 5,366%)

3. J-Day Holding SMA VAR -----> holding period use is 10 days holding period 10
10-days holding VAR 7.6449% 16.9691%
GOLD OIL
if you hold the gold for 10 days your value at risk is 7,6449%
if you hold your Oil for 10 days your value at risk is 16,9691%

If we invest inthis portfolio, the daily risk that we face is 1,1228%


and the most risk that we might face daily is 2,6119%

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