Monte Carlo Simulation Software for Risk Analysis in Excel
www.palisade.com/risk
Compute Risk Online & Offline ! Market, Credit & Country Risks
www.RiskServers.com
Struggling Teen? Information on Schools, Camps, or Home Solutions
www.teenhelp.us
On-demand risk analysis software Equity & multi-asset risk tools
www.PortfolioScience.com
Accelerated learning program that lowers dropout rates
www.staracademyprogram.com
Effective Youth Training Program Troubled/At-Risk Teens Ages 13-19
www.Rawhide.org
Beverly Hills Appraisal. Use our 30+ years experience. 800-ART-XPRT
www.artxprt.com
automatically turns Pump or Valve ON/OFF, based on liquid level.
www.automatedsonix.com
Find Fair Market Values for your donations to charities.
www.CharityDeductions.com
A working paper by Eric Falkenstein, which argues that operational risk is much more important to derivatives trading operations, although value at risk does have a role in the risk management process.
www.efalken.com
Definitions, resources, and links to consultants and providers of Value at Risk software.
www.gloriamundi.org
An article by Philippe Jorion in a 1997 issue of Derivatives Strategy.
www.gsm.uci.edu
An alternative value at risk model is presented, with practical applications for managing credit risk.
www.imes.boj.or.jp
This paper applies the value at risk methodology to bank deposits and loans.
www.imes.boj.or.jp
An article by Stanislave Uryasev in the February 2000 issue of Financial Engineering News.
www.ise.ufl.edu
Presentation of an improvement to standard value at risk (VaR) models.
www.ise.ufl.edu
An article by Richard Hoppe in the August issue of Risk Professional, which outlines the limitations of value at risk.
www.itrac.com
Criticism of value at risk (VaR) in the face of real world applications.
www.itrac.com
A working paper which discusses the appropriate use of correlation, and its implications for implementing value at risk models.
www.math.ethz.ch
Presentation of a variation of traditional value at risk (VaR) models to account for non-normal distributions.
www.mgmt.utoronto.ca
Four-part article on value at risk by Jun Pan in the Journal of Derviatives.
www.mit.edu
An article that describes the three main VaR methodologies; written by Simon Benninga and Zvi Wiener.
pluto.mscc.huji.ac.il
An article by Darryll Hendricks and Beverly Hirtle of the New York Federal Reserve that details the use of VaR in the bank setting.
www.ny.frb.org
A working paper by Darryll Hendricks of the New York Federal Reserve.
www.ny.frb.org
Presentation of various methods for evaluating the output of value at risk (VaR) models.
www.ny.frb.org
A summary of a presentation by Jon Danielsson, Casper de Vries, and Bjorn Jorgensen.
www.ny.frb.org
Analysis of weaknesses in the traditional value at risk models.
www.risklab.ch
Introductory piece that mathematically describes maximum loss techniques as an extension of value at risk.
www.risklab.ch
Adjustment to the traditional value at risk model by G. Studer of ETH-Zurich.
www.risklab.ch
A working paper by Darrell Duffie and Jun Pan of the Graduate School of Business at Stanford Unidversity.
www.stanford.edu
Thorough discussion of Value at Risk measures and their applications to foreign exchange risk management, by Thomas J. Linsmeier and Neil D. Pearson of the University of Illinois.
wuecon.wustl.edu:8089
Monte Carlo Simulation Software for Risk Analysis in Excel
www.palisade.com/risk
Compute Risk Online & Offline ! Market, Credit & Country Risks
www.RiskServers.com
Guide to Value at Risk (VaR)
Long used by institutional investors, Value at Risk can also help small traders
VaR is a tool to quantify expected worst-case losses. In other words, Value at Risk software can answer the question, “What is the most I should expect to lose over the next month, with a 95 percent or 99 percent confidence level?” VaR software is commonly used to calculate possible losses from exposure to the stock market. But, the VaR concepts are versatile enough to be used to find potential portfolio losses associated with changes in interest rates, currency fluctuations or any other risk factor. VaR facts you need to know:
- Value at Risk models use past returns to estimate the future likelihood of losses.
- Complex mathematical principles are required to calculate VaR, but you don’t need to understand the math to benefit from Value at Risk models.
- Trading strategies can minimize Value at Risk, but first the portfolio VaR must be defined.
Action Steps
The best contacts and resources to help you get it done
Learn the concepts underlying Value at Risk models
Successful investing is never easy. While most investors spend a lot of time deciding what stock to buy, few consider how to minimize their risk after they make that decision. Understanding VaR is one thing that separates professionals from amateur investors.
I recommend:
New York Institute of Finance has been training Wall Street professionals for years. Their online course is an affordable way to study Value at Risk models. Other courses are offered by Kesdee and the London-based International Faculty of Finance.
Use Value at Risk software to monitor portfolio VaR
Professional investors always have the right tools at their disposal. Value at Risk models cannot be implemented without an investment of time and money.
I recommend:
A simple calculator is available for individual investors to assess VaR for a single stock. PortfolioScience offers affordable Value at Risk modeling for individuals. Sign up for a free trial of their professional product, PortfolioScience Advisor, which is an excellent Value at Risk software tool for financial advisors or institutions. FINCAD is another VaR option for institutions.
Develop strategies to minimize VaR and apply the Value at Risk models to the portfolio
All successful investment strategies require discipline to implement them. For large portfolios, consultants specializing in VaR might be needed.
I recommend:
Firms such as Highland Associates, Value Consultants Limited, RiskMetrics Group and MSCI Barra offer risk management services and advice on how to minimize Value at Risk.
Move beyond Value at Risk to fully analyze portfolio risk
Value at Risk is only one component of portfolio risk. Interest rates can move rapidly and cause losses in fixed income instruments. Companies that import or export (nearly all large companies) are at risk if currencies move too far, too fast. Among other risks a portfolio can face are rising energy prices, which have led to recessions in the past. Today's investment environment is complex, and risk management is a never-ending process.
I recommend:
After implementing Value at Risk into the management process, take advantage of training options to learn about interest rate risk, managing currencies exposure and lessening the risk associated with the cost of energy.
Tips & Tactics
Helpful advice for making the most of this Guide- The future is never quite like the past - the actual worst-case loss may be much greater than the loss predicted by the Value at Risk models.
- In a market crash, often everything falls and the strategies used to limit the VaR may also incur losses.
- Usually, Value at Risk models will help improve portfolio performance and Value at Risk software is well worth the investment.
