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End of Horizon VaR

Source:

http://www.slideshare.net/amithetfield/maxvar-slides-v0

Intra-Horizon VaR

General Spreadsheet for Calculation of VaR and MaxVaR with Drift


5%
Calculation of VaR

Calculation of MaxVaR

Mu
Sigma
T
Prob
m
m*T
Sigma*sqrt(T)
VaR
VaR
Via VBA

12.30%
19.48%
1
5.00%
0.1040
0.1040
0.1948
-21.63%
-21.63%
-21.63%

Mu
Sigma
T
Prob
m
m*T
Sigma*sqrt(T)
phi1
exp(2mz/Sigma^2)
phi2
MaxVaR
Via VBA

12.30%
19.48%
1
5.00%
0.1040
0.1040
0.1948
0.0193
0.1940
0.1584
-29.90%
-29.90%

Prob< VaR
ES or CVaR

5.00%
-29.77%

Prob< MaxVaR
ES-I or CVaR-I

5.00%
-36.78%

Probloss = VaR-I
5.00%
Probloss = VaR
13.61%
2.72

10.00%

General Spreadsheet for Calculation of VaR and MaxVaR without Drift


5%
Calculation of VaR

Calculation of MaxVaR

Mu
Sigma
T
Prob
m
m*T
Sigma*sqrt(T)
VaR
VaR
Via VBA

12.30%
19.48%
1
5.00%
0.1230
0.1230
0.1948
-19.73%
-19.73%
-19.73%

Mu
Sigma
T
Prob
m
m*T
Sigma*sqrt(T)
phi1
exp(2mz/Sigma^2)
phi2
MaxVaR
Via VBA

12.30%
19.48%
1
5.00%
0.1230
0.1230
0.1948
0.0181
0.1575
0.2027
-28.50%
-28.50%

Prob< VaR
ES or CVaR

5.00%
-27.87%

Prob< MaxVaR
ES-I or CVaR-I

5.00%
-35.28%

Probloss = VaR-I
5.00%
Probloss = VaR
14.77%
2.95

10.00%

cumulative standard distribution

Intra-Horizon Value at Risk versus End of Horizon Value at Risk (Normal)

Time in Years
End of Horizon VaR
End of Horizon Expected Shortfall (CVaR) without Drift
Intra-Horizon VaR-I
Intra-Horizon Expected Shortfall (CVaR-I) without Drift
End of Horizon Loss Probability
Intra-Horizon Loss Probability
Joint Probability
Intra-Horizon Prob Loss > VaR
Intra-Horizon Prob Loss > -10.0%

12.30%
19.48%
95.00%

Loss Threshold

1
-19.73%
-27.87%
-28.50%
-35.28%
5.00%
5.00%
10.00%
14.77%
41.21%

2
-24.50%
-32.21%
-35.33%
-44.46%
5.00%
5.00%
10.00%
16.65%
50.87%

3
-24.27%
-32.68%
-39.03%
-49.70%
5.00%
5.00%
10.00%
20.35%
53.57%

4
-22.46%
-31.15%
-41.29%
-53.07%
5.00%
5.00%
10.00%
25.09%
54.99%

-10%

5
-19.61%
-28.33%
-42.75%
-55.36%
5.00%
5.00%
10.00%
31.31%
55.83%

6
-16.05%
-24.60%
-43.74%
-56.97%
5.00%
5.00%
10.00%
39.60%
56.37%

7
-11.93%
-20.19%
-44.43%
-58.12%
5.00%
5.00%
10.00%
50.80%
56.74%

8
-7.38%
-15.23%
-44.91%
-58.96%
5.00%
5.00%
10.00%
66.09%
57.00%

9
-2.47%
-9.82%
-45.24%
-59.58%
5.00%
5.00%
10.00%
87.14%
57.18%

10
2.73%
-4.04%
-45.49%
-60.04%
5.00%
5.00%
10.00%
57.32%

10%

End of Horizon VaR


0%

Intra-Horizon VaR-I

-10%

-20%
Risk

Given
Mu ( Mean )
Sigma ( Vol Ann. )
CL

-30%

-40%

-50%
1

Time in Years

10

Intra-Horizon Value at Risk versus End of Horizon Value at Risk (GBM )

Time in Years
End of Horizon VaR
End of Horizon Expected Shortfall (CVaR) with Drift
Intra-Horizon VaR-I
Intra-Horizon Expected Shortfall (CVaR-I) with Drift
End of Horizon Loss Probability
Intra-Horizon Loss Probability
Joint Probability
Intra-Horizon Prob Loss > VaR
Intra-Horizon Prob Loss > -10.%

12.30%
19.48%
95.00%
1
-21.63%
-29.77%
-29.90%
-36.78%
5.00%
5.00%
10.00%
13.61%
44.11%

Loss Threshold

2
-24.50%
-36.01%
-37.90%
-47.28%
5.00%
5.00%
10.00%
16.65%
50.87%

3
-24.27%
-38.37%
-42.57%
-53.67%
5.00%
5.00%
10.00%
20.35%
53.57%

4
-22.46%
-38.73%
-45.67%
-58.06%
5.00%
5.00%
10.00%
25.09%
54.99%

-10%

5
-19.61%
-37.81%
-47.82%
-61.25%
5.00%
5.00%
10.00%
31.31%
55.83%

10%
End of Horizon VaR

0%
Intra-Horizon VaR-I

-10%
-20%
Risk

Given
Mu ( Mean )
Sigma ( Vol Ann. )
CL

-30%
-40%
-50%
-60%

6
-16.05%
-35.98%
-49.40%
-63.64%
5.00%
5.00%
10.00%
39.60%
56.37%

7
-11.93%
-33.46%
-50.56%
-65.47%
5.00%
5.00%
10.00%
50.80%
56.74%

8
-7.38%
-30.40%
-51.44%
-66.89%
5.00%
5.00%
10.00%
66.09%
57.00%

9
-2.47%
-26.89%
-52.10%
-68.00%
5.00%
5.00%
10.00%
87.14%
57.18%

10
2.73%
-23.00%
-52.63%
-68.89%
5.00%
5.00%
10.00%
57.32%

Google Search
"Intra Horizon VaR"
"intra horizon value at risk"
"within horizon VaR"
"within horizon Value at Risk"
"MaxVaR" "value at risk"
"Continuous Value at Risk"

Number of references
10
1
3
4
433
54

Intra-Horizon Risk
VaR-I
Within Horizon VaR
MaxVaR
Continuous VaR

http://www.youtube.com/watch?v=HjylDBgJgl4
http://www.northinfo.com/documents/393.pdf
http://www.finance.nsysu.edu.tw/SFM/program/FullPaper/103-268144970.pdf
http://www.towerswatson.com/assets/pdf/6534/TW-EU-2012-26014_The_wrong_type_of_snow_update.pdf
http://www.slideshare.net/amithetfield/maxvar-slides-v0

Boudoukh, Jacob (Kobi), Stanton, Richard H., Richardson, Matthew P. and Whitelaw, Robert F., MaxVaR: Lo
Bhattacharyya, Malay, Misra, Nityanand and Kodase, Bharat (December 2009). MaxVaR for non-normal and
Damiano Rossello, MaxVaR with non-Gaussian distributed returns, European Journal of Operational Resear
Kritzman, Mark and Rich, Don R., The Mismeasurement of Risk. Financial Analysts Journal, Vol. 58, No. 3, M
Yen, Simon H., Lin, Shao-chieh, Re-examining the Contributions of Intra-Horizon Risk Measures

Within this area, RiskLab-Madrid has developed a software product to measure the VaR (Value at Risk) and
The Windham Portfolio Advisor
State Street
Northfield

012-26014_The_wrong_type_of_snow_update.pdf

n, Matthew P. and Whitelaw, Robert F., MaxVaR: Long Horizon Value at Risk in a Mark-to-Market Environment (March 2004). Available at SSRN: http://ss
arat (December 2009). MaxVaR for non-normal and heteroskedastic returns, Quantitative Finance, Vol. 9, No. 8, 925 935.
d returns, European Journal of Operational Research, 2008, vol. 189, issue 1, pages 159-171
of Risk. Financial Analysts Journal, Vol. 58, No. 3, May/June 2002. Available at SSRN: http://ssrn.com/abstract=316584
butions of Intra-Horizon Risk Measures
http://www.finance.nsysu.edu.tw/SFM/program/FullPaper/103-268144970.pdf

re product to measure the VaR (Value at Risk) and MaxVaR which uses extreme value theory (EVT). This product is already being used in Santander Fin

onment (March 2004). Available at SSRN: http://ssrn.com/abstract=520805 or http://dx.doi.org/10.2139/ssrn.520805

his product is already being used in Santander Financial Securities.