ACTSC445 Lecture : unit9 value at risk
25 Nov 2011
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Department of statistics and actuarial science, university of waterloo. So far in this course, we have studied asset-liability issues related to risks associated with movements in interest rates. In this unit, we take a broader point of view and study risks that arise from a variety of factors: not only movements in interest rates, but also in stock prices, currency rates, etc. To quantify this more global risk or total risk, banks and insurance companies often use a measure called value-at-risk (var). Although this measure is not perfect, its widespread use makes it relevant to study. De nition: var is a statistical measure of a portfolio"s risk that estimates the maximum loss that may be experienced by the portfolio over a given period of time and with a given level of con dence. P (ln > var ,n) = 1 .
