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FINANCIAL MARKET COURSES

VAR - An Introduction

With the initial growth of the derivatives market in the 1980s, banks, regulators and other market professionals were all faced with more complex portfolios to evaluate and explain. Work done in the major trading banks in the early 1990s was instrumental in devising better ways to analyze portfolio risk. Value at risk (VAR), the result of this work and the subject of this course, has subsequently become one of the key measures that risk managers use to understand the risks in a portfolio and to compare the risks in one portfolio with those in another.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Explain how value at risk is used to measure market risk

    Describe the three methods for calculating VAR

    List the main advantages and disadvantages of VAR as a measure of risk

  • COURSE OUTLINE

    Topic 1: Methods of Calculating VAR

    Variance-Covariance

    Historical Simulation

    Monte Carlo Simulation

    Topic 2: Definition

    What is Value at Risk?

    Steps for Calculating Value at Risk

    Formula

    Topic 3: Advantages and Disadvantages of VAR

    Advantages

    Disadvantages

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    50 Minutes

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