[R] Value at Risk historical simulation
Benjamin Dickgiesser
dickgiesser at gmail.com
Fri Nov 10 10:08:36 CET 2006
Hi
Has someone got a package/script at hand to do a historical simulation
to calculate the Value at Risk?
If your not sure what Historical Simulation is:
In simple terms, Historical Simulation (HS) is just taking sample
percentiles over a moving sample. Suppose we want to use HS to predict
a portfolio's Value-at-Risk at a confidence level of 99 percent and
the window size is chosen to be 250 trading days. Then the 1 percent
sample percentile is some amount between the second worst portfolio
loss and the third worst portfolio loss (since 250 × 0.01 = 2.5). We
decide to determine the Value-at-Risk through interpolation; in this
case the VaR lies halfway between the second worst portfolio loss and
the third worst portfolio loss.
Benjamin
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