What difference does volatility scaling make on estimating the VaR and expected shortfall when we use historical simulation?
generally use of VaR is to measure any kind of loss that may occur (risk) on investments or buying any property.
but when we take historical stimulation , one need to see length of historical period and the structure of shocks with their hetroscedendicity in the risk factrs in the simple case.
but if you consider volatlity scaling on estimating the VaR (value at risk) using historical stimulation , one needs to rescale the past observation of risk factors to account for volatility dynamics during the estimation period.
this kind of study is more used to check back testing of properties with increase in price and its cycle.
What difference does volatility scaling make on estimating the VaR and expected shortfall when we use historical simulation?
2. What is the difference between expected shortfall and value at risk? What is the theoretical advantage of expected shortfall over value at risk?
A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to maturity is 9 months. For the second option the stock price is 20, the strike price is 19, and the volatility is 25% per annum, and the time to maturity is 1 year. Neither stock pays a dividend. The...
How does accrual accounting complicate the use of corporate financial statements in estimating corporate value (by investors) or managing and maximizing corporate value (by management)? 1. 2. Explain how management and investors can effectively determine a company's financial condition using financial statement ratio analysis? 3. Explain the underlying ideas behind time value of money. Explain when one would use Present Value to make a financial decision and when one would use Future Value. How does accrual accounting complicate the use...
Section B) A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to maturity is 9 months. For the second option the stock price is 20, the strike price is 19, and the volatility is 25% per annum, and the time to maturity is 1 year. Neither stock pays a...
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