Historical Method of Calculation

The method is used to calculate the VaR model.

Portfolio value at the current date for each organization included into calculation is calculated as follows:

Where:

Create a matrix of financial instrument prices taking into account yield type. If logarithmic yield is used, the calculations are based by the following formula:

If logarithmic yield is not used:

Where:

Portfolio value is calculated for all financial instruments, for each organization involved in calculation, and for each date contained in the yield matrix (starting from h + 1):

Where:

The PDiff matrix is used to create a vector of values sorted in ascending order for each organization. PDiffl -  price vector sorted ascending for the l-th organization.PDiffl -  price vector sorted ascending for the l-th organization.

Calculate the coefficient to get the value of the PDiffl vector by the formula:

Where

Formula to calculate VaR portfolio:

Where el - the portfolio's value for all financial instruments included into calculations, for the l-th organization.

The output parameter is the matrix VaR = ǁVaRlǁ, that contains VaR of portfolio of each organization included into calculations.

See also:

Value-At-Risk