Value at Risk (VaR) – Advanced

In this course we demonstrate how to conduct sensitivity analysis and forecasting related to Value at Risk (VaR) measures. Participants will use Monte Carlo simulation procedures to examine how risk changes under a variety of potential scenarios. We will discuss how to use these Monte Carlo simulations as part of a portfolio of tools to examine a range of downside risks based on normal and non-normal distributions of risk outcomes. The course is conducted as a workshop with participants completing a series of exercises using Excel spreadsheets.

Course Objectives

By the end of the course, the participants will be able to:

• Run Monte Carlo Simulations to obtain estimates of Value at Risk
• Explain how sensitivity analysis can help to construct confidence intervals around VaR point estimates
• Use confidence intervals to forecast changes in VaR under a variety of possible future scenarios
• Recognize the limitations on VaR and discuss alternative approaches to deal with risk management needs
• Calculate the impact on VaR from changes in other values such as increasing correlation in asset returns

Suggested Prerequisites:

• Value at Risk

Program Level: Intermediate –Advanced

Advance Preparation: Working Knowledge of Excel

Computers and Financial Calculators: Computers

Recommended CPE Credits: 7