VAR - Part 1

VAR - Part 1

Overview

Value at risk (VAR), the result of this work and the subject of this tutorial, has subsequently become one of the key measures that risk managers use to understand the risks in a portfolio and to compare the risks in one portfolio with those in another. This tutorial examines the first of the three approaches to calculating VAR - the variance-covariance or parametric approach. Starting off with a single-asset portfolio, the tutorial progresses to include more advanced VAR calculations for portfolios containing derivatives, incorporating concepts such as incremental VAR and interest rate dependent mapping.

Objective

On completion of this tutorial, you will be able to:
- Explain how value at risk is used to measure market risk
- Describe the three methods for calculating VAR
- List the main advantages and disadvantages of VAR as a measure of risk
- Use the variance-covariance approach to calculate VAR for both single-asset and multi-asset portfolios
- Use incremental VAR (IVAR) to identify the different contributions individual assets make to the overall VAR of a portfolio
- Use mapping to calculate the VAR of portfolios that contain instruments with multiple cash flows
- Calculate VAR for portfolios containing derivatives

Content

Module 1: VAR - An Introduction
Topic 1: Methods of Calculating VAR
Topic 2: Definition
Topic 3: Advantages and Disadvantages of VAR

Module 2: VAR - Variance - Covariance Approach
Topic 1: Calculating VAR Using the Variance-Covariance Approach
Topic 2: Incremental VAR
Topic 3: Mapping Positions
Topic 4: Calculating VAR for Portfolios Containing Derivatives

Details

Code
TERFR17004901
Venue
ePlatform
Language
English
Level
Advanced
Hours
SFC:2.5, PWMA:2.5
Fees
All Member: HK$750
Non-Member: HK$1125
Staff of Corporate Member: HK$750