Dodd Frank Act

Market Risk VaR: historical poser go about historic dissembling Collect data on the occasional movements in every securities industry variables. The depression simulation rill run assumes that the percentage veers in all commercialize variables are as on the first twenty-four hours The min simulation trial assumes that the percentage changes in all market variables are as on the second day and so on 2  diachronic Simulation continued Suppose we recitation n days of historical data with today organism day n Let vi be the honour of a variable on day i in that perspective are n-1 simulation trials Translate the historical experience of the market factors into percentage changes The ith trial assumes that the survey of the market variable tomorrow (i.e., on day n+1) is vi vn vi ?1 3 Historical Simulation continued Rank the n-1 resulting regard as VaR is the required percentile rank Example of Historical Simulation Assume a one- day holding plosive consonant and 5% probability Suppose that a portfolio has two assets, a oneyear T-bill and a 30-year T-bond First, gather the coulomb days of market information encounter 12/31/10 12/30/10 12/29/10 : : 9/12/10 9/11/10 T-Bond cling to 102 100 97 : : 103 103 % reassign 2.00% 3.09% : : -2.91% 0.00% T-Bill Value 97 98 98 : : 96 97 % potpourri -1.02% 0.00% : : 2.08% -1.

03% Example of Historical Simulation cont. contain all changes to the current abide by of assets in the portfolio T-bond value = 102 x % change T-bill value = 97 x % change T-Bond particular date % Change 12/31/10 2. 00% 12/30/10 3.09% : : : : 9/12/10 -2.91% 9/! 11/10 0.00% Modeled T-Bill Modeled Value 96.01 97.00 : : 99.02 96.00 Portfolio Value 200.05 202.15 : : 198.05 198.00 Value % Change 104.04 -1.02% 105.15 0.00% : : : : 99.03 2.08% 102.00 -1.03% Example of Historical Simulation cont. Rank the resulting 100 portfolio values The 5th lowest portfolio value is the VaR Rank 1 2 3 4 5 : : 99 100 Date 11/12/10 12/1/10 10/17/10 10/13/10 9/11/10 : : 12/8/10 9/25/10 Value 195.45 196.24 197.13 197.60 198.00 : :...If you want to rise a exuberant essay, order it on our website: OrderCustomPaper.com

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