VaR - Value at Risk

[DaWhim]

what is the whole thing about? I kinda get an idea that this can measure the market risk and credit risk.

anyone knows this stuff?

 

[thereds]

It's how much value you have at risk.

/EOF

 

[DaWhim]

Originally posted by: thereds
It's how much value you have at risk.

/EOF

more than that consider this is the most advanced model used to value risk in the financial market.

 

[thereds]

I said EOF, which means no more posting in the thread.

Anyway -
from Wikipedia
A variety of models exist for estimating VaR. Each model has its own set of assumptions, but the most common assumption is that historical market data is our best estimator for future changes. Common models include:

* (1) variance-covariance (VCV), assuming that risk factor returns are always (jointly) normally distributed and that the change in portfolio value is linearly dependent on all risk factor returns,
* (2) the historical simulation, assuming that asset returns in the future will have the same distribution as they had in the past (historical market data),
* (3) Monte Carlo simulation, where future asset returns are more or less randomly simulated

 

[DaWhim]

I have looked at wiki already. it has only market risk, not credit risk.