Worst fluctuation method for fast value-at-risk estimates

Jean-Philippe Bouchaud and Marc Potters (marc.potters@science-finance.fr)
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Jean-Philippe Bouchaud: Science & Finance, Capital Fund Management

No 9909245, Science & Finance (CFM) working paper archive from Science & Finance, Capital Fund Management

Abstract: We show how one can actually take advantage of the strongly non-Gaussian nature of the fluctuations of financial assets to simplify the calculation of the Value-at-Risk of complex non linear portfolios. The resulting equations are not hard to solve numerically, and should allow fast VaR and Delta-VaR estimates of large portfolios, where by construction the influence of rare events is taken into account reliably. Our method can be seen as a correctly probabilized `scenario' calculation (or `stress-testing').

JEL-codes: G1 (search for similar items in EconPapers)
Date: 1999-09
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sfi:sfiwpa:9909245

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