Value at risk (intro)
General · Mathematics
Study notes
Q: Portfolio ₹10 lakh, daily σ = 2%. Find 1-day 95% VaR. Parametric: VaR = 1.645×σ×value. = 1.645×0.02×1000000 = ₹32,900. Interpretation: 95% chance loss < ₹32,900 tomorrow! 5% chance worse! Expected shortfall: average beyond VaR! (VaR: risk's headline number!)