A
andylamyuen
Member
I have recently downloaded a file related to VaR. I know that VaR at 100*p% level is the value of x in the following equation:
Pr(Loss in a t-day period >= x) = p.
However, the file has a different calculation method of finding VaR. According to the file:
For example, if
mark-to-market = $100M
standard deviation of annual return = 15%
default holding period = 10 days
credibility level = 99%,
then
VaR = 100M*15%*(10/252)^0.5*2.33 = 7M.
I don't know how we can get this formula. Can someone explain this? Thanks!
Pr(Loss in a t-day period >= x) = p.
However, the file has a different calculation method of finding VaR. According to the file:
For example, if
mark-to-market = $100M
standard deviation of annual return = 15%
default holding period = 10 days
credibility level = 99%,
then
VaR = 100M*15%*(10/252)^0.5*2.33 = 7M.
I don't know how we can get this formula. Can someone explain this? Thanks!