What is value at risk (VaR)? FRM T1-02

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Value at risk is just a statistical feature of the probability distribution (the hard part is specifying the probability distribution): VaR is the quantile associated with a selected probability; i.e., what's the worst that can happen with some level of confidence? (Here is my XLS trtl.bz/1008-what-is-var)
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7 окт 2017

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Комментарии : 39

@kapoiosenadip7157 2 года назад

My lecturer in a very expensive business school couldn’t explain that for 3 weeks... thank u so much man

@junal27 Год назад

Nowadays education is not a matter of money anymore but willing to learn

@loveraswift5665 7 месяцев назад

Yeah... My teacher taught this for hours but this video clearly demonstrates what it is in only 10 minutes!

@hwillis7570 4 года назад

Nice explanation, clear, concise. Keep up your good work.

@Edusho09 5 лет назад

I'm from Germany and your videos are great! Easy to understand. Keep it up !

@bionicturtle 5 лет назад

Thank you for watching! We are so happy to hear that our videos are so helpful!

@TheChaozao 5 лет назад

god bless you. u explained what my book and lecturer couldnt

@bionicturtle 5 лет назад

Thank you for watching! We are very happy to hear that our video was so helpful.

@nafiibrahimaj8870 4 года назад

Great instructor of our modern era!, thank you so much for simplicity and practicality

@bakhtamatri9930 3 года назад

Thanks a lot, very clear explanation for VAR.

@guapotomask 6 лет назад

Great video very well explained

@bionicturtle 6 лет назад

Thank you for watching! We are happy to hear that our video was helpful!

@BrigataUPG 3 года назад

Hi. How it would be possible to calculate the VAR for a company which holds money in a bank account? It would make sense to assess the bank financial soundness, calculating the CAP ratio e than calculating the VAR for that company? what formula might be applied for this kind of calculation? thanks!

@jrfabian 4 года назад

very nice video!! thank you!

@knittingangel3859 2 года назад

Great explanation, thank you

@jenevavergara4125 5 лет назад

Hi thanks for the great video, I am doing thesis using GARCH-MIDAS model using Generalized Hyperbolic distribution, do you have any idea how to compute VAR in R using these models and distribution?

@stickhero23 4 года назад

Hello, completed your thesis? jedwriter.com

@fjosh457 6 лет назад

maximum loss that an investor can put up with; so that defines amount of collateralization after default.

@simfinso858 6 лет назад

it is just similar to " p" value. isn't it?

@roberts8783 3 года назад

Whats the typical var of a market portfolio like s and p 500 ?

@trifenatejowijaya6857 3 года назад

Thank you!!!!!!

@investwithvincent6329 2 года назад

What's formula in the cell for VaR?

@celinetjokro2515 3 года назад

hi, shouldn't the test be two tailed?

@18lan 3 года назад

thank you

@jijiBoylieber 5 лет назад

Hello, can i please know what the confiance level is?

@bionicturtle 5 лет назад

We select the confidence level. Typical selections are 95.0%, 99.0% or 99.0% because we are typically interested in levels of loss that shouldn't be exceeded except rarely; e.g., 99.0% confident VaR means "we expect this loss to be exceeded only 1.0% of the time."

@userpanx 5 лет назад

The horizontal scale: shouldn't the value at the center of the chart equal $0.0 ? Right now is $1.0.

@bionicturtle 5 лет назад

I happened to define N(1,1) per the label σ = 1, µ = 1 rather than a standard normal, as mentioned at ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-mvl32w_y38I.html

@riccardocaselli4048 4 года назад

Shouldn't the distribution be 2.5% each side with 95% confidence level instead of 5% on the left side?

@mdavis1992 3 года назад

He says in the video that VAR is single tailed because it is only concerned with losses

@Manch271 2 года назад

At around 3:53, the Y-Axis (which represents probability) is showing data corresponding to 10% of probability, NOT 5% as claimed in the video, isn't it?

@bionicturtle Год назад

Hi Sriman, actually the red AREA under the curve is 5% per =NORM.S.INV(5.0%) = -1.644853627 or rounded -1.645 and at the same time =NORM.S.DIST(-1.645, FALSE) = 0.10313564 such that you are correct in one sense: the pdf curve hit the point (-1.645, 0.10313564) but this is the density function. The 0.103 is not a probability; this is a continuous function. I hope that helps.

@FelixFrost 2 года назад

Corret me if I am wrong: With the non-parametric ES we simply average the returns that are lower than our desired percentile (e.g the lower 5% of last year's returns) - ok. My question is, why do we use average? Isn't this bound to be affected by extremely rare but negative events? Why don't we use a weighted average? Or a median? Many thanks

@bionicturtle 2 года назад

Hi Frosty, short answer: yes, we can (for non-param/discrete distributions also). ES is a special case of the a spectral measure (which is a special case of a general risk measure) where the tail losses are equally weighted, however a spectral measure has "weakly increasing" (ie, not decreasing) weights so it's more natural state is increasing weights as losses are greater.

@ntcuong01ct1 3 года назад

Hello friends, I have a few questions: 1 / Risks will be specified after we have identified the audience, objectives, and operational processes ?. 2 / Risk will be directly integrated into the business process ?. 3 / The Risk department is responsible for determining the VaR (Value at Risk) and presenting it to the Board of Directors seeing the risks and proactively preventing them? 4 / Actively preventing risks will help us improve the value of products / services to customers?