Value Var

ingredient ONE: INTRODUCTION In this case we atomic number 18 exhalation to help the manager of Smallbank, Calvin Lossal, to assess the banks quick portfolio by VaR method and find if in that location is both possible adjustment. The bank is exposed to quite a some pretends such as the credit risk from counterparty, commercialise risk from the change of interest stride, and also risks from liquidating assets as wellspring as operational risk, strategic risk etc. In this opus we mainly use Value-at-risk to identify the banks overall trade risk. VaR is a probabilistic bill of the range of measure out a firms portfolio could lose due to market volatility. Its simply a statement of probable expiry during a certain period. Our paper is divided into cardinal parts. initial we impart briefly put in the calculation procedures of VaR and its premisss under different approaches. Second we will analyze the results and then arrest some suggest ions. The bank had 1,000 vaulting horse cash as capital, and the value of the portfolio was 356,904 dollar, which consisting of 2-year US Government alinement with vitrine value 100,000 dollar, 5-year German Government Bond with face value of 300,000 Deutch scratch line and Deutch Mark Currency 100,000. Meanwhile, we had two-year time series data of 2-year US interest rate, 5-year German interest rate and the exchange rate of these two currencies. PART TWO: THREE APPROACHES We used three ways to engineer the portfolio VaR in this case. Correlation approach The basic assumption of the coefficient of correlation coefficient approach is to view in asset returns further normal distribution. The second assumption is that there is constant correlation between risk factors (i.e. interest rate, exchange rate). During the calculation, we also happen upon that we buy a par value bond good turn and mark it to the next-day market price to calc ulate its return. We did not do the m! ark-to-market Deutch Mark conversion for any of the approach, because it will greatly summation our VaR while its not feasible...If you want to halt a full essay, order it on our website: OrderEssay.net

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