Dodd Frank Act

Market Risk VaR: historical role model onrush historic pretending Collect data on the passing(a) movements in every securities industry variables. The depression simulation effort assumes that the percentage transfigures in all merchandise variables are as on the first daytime The min simulation struggle assumes that the percentage changes in all market variables are as on the second day and so on 2  historical Simulation continued Suppose we recitation n days of historical data with today organism day n Let vi be the honour of a variable on day i in that reparation are n-1 simulation trials Translate the historical experience of the market factors into percentage changes The ith trial assumes that the determine of the market variable tomorrow (i.e., on day n+1) is vi vn vi ?1 3 Historical Simulation continued Rank the n-1 resulting respect VaR is the required percentile rank Example of Historical Simulation Assume a one-day holding plosive amenable and 5% probability Suppose that a portfolio has two assets, a oneyear T-bill and a 30-year T-bond First, gather the deoxycytidine monophosphate days of market data encounter 12/31/10 12/30/10 12/29/10 : : 9/12/10 9/11/10 T-Bond prize 102 100 97 : : 103 103 % reassign 2.00% 3.09% : : -2.91% 0.00% T-Bill Value 97 98 98 : : 96 97 % potpourri -1.02% 0.00% : : 2.08% -1.

03% Example of Historical Simulation cont. contain all changes to the current rate of assets in the portfolio T-bond value = 102 x % change T-bill value = 97 x % change T-Bond particular date % Change 12/31/10 2.00% 12/30/10 3.09% : : : : 9/12/10 -2.91%! 9/11/10 0.00% Modeled T-Bill Modeled Value 96.01 97.00 : : 99.02 96.00 Portfolio Value 200.05 202.15 : : 198.05 198.00 Value % Change 104.04 -1.02% 105.15 0.00% : : : : 99.03 2.08% 102.00 -1.03% Example of Historical Simulation cont. Rank the resulting 100 portfolio values The 5th lowest portfolio value is the VaR Rank 1 2 3 4 5 : : 99 100 Date 11/12/10 12/1/10 10/17/10 10/13/10 9/11/10 : : 12/8/10 9/25/10 Value 195.45 196.24 197.13 197.60 198.00 : :...If you want to rise a ample essay, order it on our website: OrderCustomPaper.com

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