Value-at-Risk (VaR) Introduction
Moorad Choudhry
25 years: Treasury & ALM
Any transaction undertaken by a bank carries an element of risk. Value-at-risk, or VaR, quantifies the probability of loss to a dollar value. Moorad shows how this is achieved using the variance-covariance method.
Any transaction undertaken by a bank carries an element of risk. Value-at-risk, or VaR, quantifies the probability of loss to a dollar value. Moorad shows how this is achieved using the variance-covariance method.
Value-at-Risk (VaR) Introduction
15 mins 24 secs
A bank will wish to estimate the extent of its risk exposures so that it can better manage its P&L account, and gain an accurate estimate of its future capital requirements. VaR is a methodology that can be used to value this risk exposure. VaR measures the potential loss in market value of a portfolio using assumed or estimated volatility.
Key learning objectives:
Define VaR
Outline the main VaR methodologies
Learn how to calculate VaR using the variance-covariance method
Moorad Choudhry
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