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Var Analysis
Var Analysis
Var Analysis
Please enter the required data in the green input cells and complete the correlation table in the white cells if you want to complete the NetVaR analysis. O
VaR" to produce the Net Value at Risk for the portfolio. Up to 10 assets/currencies can be analysed, but this spreadsheet can easily be extended to cove
Currency
US-$
Yen
Euro
850,000
57,000,000
600,000
800,000
60,000,000
550,000
50,000
-3,000,000
50,000
3.200%
3.000%
2.700%
Exchange
rate of
currency
(f/h)
1.5500
150.0000
1.7500
US-$
Yen
Euro
US-$
Yen
Euro
1.000
-----
0.900
1.000
---
0.750
0.850
1.000
Gross VaR
3,966.08
Net VaR
1,890.98
Portfolio Variance
0.0007878797
Portfolio volatility
0.0280691955
if you want to complete the NetVaR analysis. Once all data is entered in the corresponding cells click on the button "Calculate Net
his spreadsheet can easily be extended to cover more assets/currencies.
Value of
position in
home
currency
Weight in
portfolio
volatility
times
absolute
position
32,258.1
-20,000.0
28,571.4
79.007%
-48.984%
69.977%
1,032.3
600.0
771.4
40,829.5
2,403.7
Please note:
The Gross VaR statistic is problematic as it assumes a simultaneous depreciation of cash inflow currencies and an
appreciation of cash outflow currencies. Although the Net VaR statistic adjusts for correlation effects and short/long
positions in the portfolio, the analysis is still problematic for a number of reasons.
First of all, the estimates of volatility and correlation are prone to subjectivity. Depending on how one estimates
these figures (historical averages, expectations, implied values) different results are possible. In addition, the
analysis assumes a normally distributed exchange rate/underlying asset, this might not hold true for real life
purposes where most assets follow a leptokurtic distribution rather than a normal distribution. Last but not least the
interpretation of the VaR statistics is only a financial measure. Economic risk is not covered by this analysis and has
to be considered in addition to this static figure.
I assume no responsibility for any losses incurred by using this model. VaR statistics are calculated on the basis of
a 10% confidence interval, i.e. there is a 5% risk of losing the calculated VaR amount.
Andreas Emmert, June 2002