Period value at risk and its estimation by Monte Carlo simulation

Yanli Huo, Chunhui Xu and Takayuki Shiina

Applied Economics Letters, 2022, vol. 29, issue 18, 1675-1679

Abstract: Most risk indicators for an investment show the risk at a certain future time; they cannot reflect the risk over a time period, which may be more important than the risk at a certain time. We proposed Period Value at Risk (PVaR) for measuring market risk over a period of time, and a historical simulation method to estimate the PVaR of an investment. This paper suggests a method which uses Monte Carlo simulation to estimate PVaR. We can calculate the estimation error with this method, and determine the least number of simulations for getting a qualified estimation.

Date: 2022
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DOI: 10.1080/13504851.2021.1958136

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