Parametric Method: Value at Risk (VaR) In Excel

Подписаться 33 тыс.

Просмотров 27 тыс.

50% 1

Ryan O'Connell, CFA, FRM explains how to calculate Value at Risk (VaR) in Excel using the parametric method (variance-covariance method).
📘 FRM Exam Prep Discount - AnalystPrep:
► Get 20% off FRM Part 1 and Part 2 complete courses with promo code "RYAN20". Explore here: analystprep.com/shop/frm-part-1-and-part-2-complete-course-by-analystprep/?ref=mgmymmr
🎓 Tutor With Me: 1-On-1 Video Call Sessions Available
► Join me for personalized finance tutoring tailored to your goals: ryanoconnellfinance.com/finance-tutoring/
👨‍💼 Freelance Financial Modeling Services:
► Custom financial modeling solutions tailored for your needs: ryanoconnellfinance.com/freelance-finance-services/
💾 Download Free Excel File:
► Grab the file from this video here: ryanoconnellfinance.com/produ...
Chapters:
0:00 - Calculate Daily Returns Using Yahoo! Finance
0:43 - Calculate Security Standard Deviation and Covariance
2:35 - Create Assumptions for Portfolio
2:58 - Calculate Variance and Standard Deviation of Portfolio
4:04 - Calculate Value at Risk (VaR) In Excel (Parametric Method)
Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.

Опубликовано:

23 июл 2024

Ссылка:

Скачать:

Готовим ссылку...

Добавить в:

Мой плейлист

Посмотреть позже

Комментарии : 50

@RyanOConnellCFA Год назад

📘 FRM Exam Prep Discount - AnalystPrep: ► Get 20% off FRM Part 1 and Part 2 complete courses with promo code "RYAN20". Explore here: analystprep.com/shop/frm-part-1-and-part-2-complete-course-by-analystprep/?ref=mgmymmr 👨‍💼 Freelance Financial Modeling Services: ► Custom financial modeling solutions tailored for your needs: ryanoconnellfinance.com/freelance-finance-services/ 💾 Download Free Excel File: ► Grab the file from this video here: ryanoconnellfinance.com/product/parametric-method-value-at-risk-var-excel-template/

@prekshitjain1823 2 года назад

Your videos are to the point and very informative. I Really enjoy watching them. Keep up the good work 👍

@RyanOConnellCFA 2 года назад

Really appreciate the feedback Prekshit! Thank you

@tomasrnogueira Год назад

That was really helpful, Ryan. Thanks!

@RyanOConnellCFA Год назад

My pleasure Tomas!

@user-cu8kf2jx1z Год назад

Really appreciate your video! It helps me a lot.

@RyanOConnellCFA Год назад

Glad to hear it!

@StraitProtein 2 месяца назад

what would I do without you? thank you. you will remain in my prayers for the rest of my life.

@richardgordon 8 месяцев назад

You’re got a really good channel!

@RyanOConnellCFA 8 месяцев назад

Thank you so much!

@user-uj1rq6fh2x 6 месяцев назад

Thank you very much for this video

@RyanOConnellCFA 6 месяцев назад

You are welcome!

@Kaplanel Год назад

Thank you so much

@RyanOConnellCFA Год назад

You're most welcome

@Kaplanel Год назад

@@RyanOConnellCFA💕💕💕

@marcoalva2328 Год назад

Hi, how would it be if we only analyze one stock, not a porfolio?? Thank you for your explanation!!

@RyanOConnellCFA Год назад

In order to do this, you would just take the returns of one stock instead of combining them. It would be easier to do actually

@pureloor8634 5 месяцев назад

Hi Ryan I really appreciate the content - Ive used it to self study most of my finance degree! Do you know of a method to implement stop-loss orders into this VaR method? I’m struggling because, based on the period and management structure in question, theres a certain risk of lost return potential. Thank you again!

@RyanOConnellCFA 4 месяца назад

I'm truly humbled to hear my videos have significantly aided your finance degree studies-thank you for sharing that with me! One thing you could try is to utilize the historical simulation VaR approach to determine your stop-loss levels. By analyzing past market movements and your VaR calculations, set your stop-loss orders at points that align with historical losses exceeding your VaR threshold.

@richardharagos8528 Год назад

Hi Ryan, can you please explain why do you incorporate the Expected Return in the VaR formula? Most other sources I found online simply calculate without that. Thanks

@RyanOConnellCFA Год назад

Hi Richard, great question! The Expected Return is often incorporated into the Value at Risk (VaR) calculation for a more precise long-term estimation. While it's true that some methods calculate VaR solely from the standard deviation of historical returns, including the Expected Return gives us a more comprehensive view. When we incorporate Expected Return, we're not only looking at the risk in terms of potential loss but also in relation to the potential gains.

@toby7720 Год назад

@@RyanOConnellCFA Would you mind explaining on how to obtain the Expected Return of an asset?

@padmanabans8552 Год назад

Hi Ryan, great video! can you please explain how to calculate VaR using this method on an ECB loan?

@RyanOConnellCFA Год назад

Thank you Padmanaban! Sorry, but I don't have any familiarity with that type of loan so I'm not sure how you'd accomplish that

@ignaciolopezdepablo3035 9 месяцев назад

how do you know de expected values from the variables do you make de arege of the variebles or what?

@RyanOConnellCFA 9 месяцев назад

Please take a look at the start of this video to see how I will determine a value for the expected return and standard deviation of an asset based on its historical data: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-XQS17YrZvEs.html

@mlacorte21 10 месяцев назад

Hi Ryan, could the VAR be shown in return terms rather than dollars? If so would it just be the dollar VAR/Portfolio Value?

@RyanOConnellCFA 10 месяцев назад

Hey! You could do this by omitting cell F3 (the portfolio value) when calculating expected return @4:39 . You will also need to omit cell F3 from the calculation @5:42 when calculating VaR. When I incorporated the portfolio value into this formula I converted it from a percentage to a dollar based VaR.

@maftab979 2 месяца назад

Why is the square root not taken in covariance when annulising the value?

@92MrAlvin 2 года назад

Hi Sir. Your video here is really good. I got a new insight. Would you mind creating a video using Excel of making 95%-Expected Shortfall (CVaR) from a portfolio using a historical simulation approach? It would be very great and helpful :D Thank you so much

@RyanOConnellCFA 2 года назад

This is a good video idea! I'll put it on my list for the future but it may be a while as I have quite a backlog of videos

@joselozano41 8 месяцев назад

Why is the square root of trading days used for the annual conversion? I understand that using 252 directly gets us a pretty unreasonable number, so my question is more "whats the reasoning behind the sqrt of days as opposed to some other product of the number of days?"

@RyanOConnellCFA 8 месяцев назад

In order to convert daily standard deviation to annual standard deviation, you must multiply daily standard deviation by the square root of the number of days. We assume there are 252 trading days in a year. This is simply a mathematical rule

@chunhoewong1064 11 месяцев назад

Can I understand why you use expected return to minus those values? I couldn’t understand it

@RyanOConnellCFA 11 месяцев назад

Hello, Value at Risk is a measure used to understand the potential downside or loss an investment portfolio could face over a specific period for a given confidence interval. When calculating VaR, it's important to understand that we are interested in the unexpected negative deviations from our expected return. Think of the expected return as our 'average' or 'normal' return for any given day. It's the scenario we most likely anticipate. So, when we want to measure the potential loss relative to this 'normal' situation, we subtract out the expected return. This helps us isolate and focus only on the unfavorable deviations, giving us a clearer picture of the risk. In simpler terms, by subtracting the expected return, we're setting our starting point at what we think is going to happen on an average day. From there, we measure how bad things could get relative to this baseline

@chunhoewong1064 11 месяцев назад

Thanks for the response. However, I still have few questions: (1)Understand that the formulae of VaR is Amount invested x standard deviation x Z score. In this case, why would we use Expected return - VaR (which is amount invested Amount invested x standard deviation x Z score) to arrive at VaR again? Are there any duplications? (2) Are there two different formulae for VaR. One is amount invested Amount invested x standard deviation x Z score. And second one is Mean - Zscore (standard deviation) - this is what I learnt from your first video. What are the differences between these two? Appreciate your advice on this.

@RyanOConnellCFA 11 месяцев назад

Where did you get that VaR formula from? VaR calculations should take into account the expected return so you may have an incorrect formula.

@palakjhawar9395 11 месяцев назад

Hey Ryan, could you please explain me how did we get the z score of 1.645 for confidence level of 0.95? Thanks a lot!

@RyanOConnellCFA 11 месяцев назад

My pleasure! This is the Z-score for a 1-tailed distribution at a confidence level 0.95. You can find a "1 tailed z score table" by Googling that phrase

@Ryanhess1986 9 месяцев назад

I thought for 1.64 was used for 95% one tail and 90% two tail? 1.96 for 97.5% one tail and 95% two tailed? I must have it backwards, either way, great video as usual. Love the work you do.

@RyanOConnellCFA 9 месяцев назад

@@Ryanhess1986 Hey Ryan, thank you for calling this out. I had it backwards in the comment I replied to so I just edited that comment. This is in fact a 1 tailed test. VaR is based on 1 tailed tests as we are only calculating the left tail and you are correct that 1.645 is used for 95% one tailed tests

@Ryanhess1986 9 месяцев назад

@@RyanOConnellCFA now it all makes more sense, lol! Thanks for clarifying, as VaR is something I am not too familiar with at all, so that comment certainly made it “click”!

@RyanOConnellCFA 9 месяцев назад

@@Ryanhess1986 Awesome, I'm glad to hear that Ryan! This video here may be an even better starting point for you then: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-2SMkbMDypXI.html