Sample Spreadsheet Portfolio

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					                                      Calculating VAR



                        You have a portfolio with one asset.
          Use the spreadsheet to determine VAR using different parameters.




          Market value of portfolio                     USD 6,666,666.67

 Step 1   Determine holding period (days)                      5

 Step 2   Select confidence level                            99.00%

 Step 3   Create probability distribution of returns   Normal distribution

 Step 4   Determine correlation between assets                 n/a

 Step 5   Annual volatility of portfolio                     6.00%

 Step 6   Calculate the VAR estimate                    USD 131,055.25



                                           VAR   =      USD 131,055.25               What does this value mean?


With 1.00% probability, the portfolio may lose more than USD 131,055.25 over 5 trading days.
                                        Trading Days             Confidence levels
                                                           Holding Period
                                                       1       1    90.00%
                                                               5    95.00%
                                                              10    97.50%
                                                                    99.00%




                   Number of std deviations from mean = 2.326




             What does this value mean?


over 5 trading days.

				
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posted:8/5/2011
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