• April 13th, 2016

Risk Management and VaR

Paper, Order, or Assignment Requirements

The task you are given is to estimate the market risk for a hypothetical $10,000 holding of BHP shares, held on March 1 (you are working out the risk position assuming that you held $10,000 worth at the close of trading that day). You will do this by estimating the Value-at-Risk for the stock using historical data.
You will be asked to calculate the following
– 10 day VaR for BHP shares at confidence levels of 99%.

– You will then write a brief report of no more than four pages including graphs that presents your results. A rough outline of what your report could include is
o Present the final VaR(10, 99%) for March 1 based on your preferred model. You must also include some explanation of how these final estimates should be interpreted (what does this mean).
o Brief description of the final/preferred VaR model you used. This includes the length of any subsamples of data or selection of any fixed parameters.
o Presentation of main results in the back-testing study. With this should be a very brief description of data (start/end dates, number of observations and details of where you got the data, what the data was (e.g. – closing prices?) and how you calculated returns.

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