Value-at-Risk for Financial Derivative Instruments

Lv, Mingyue (2011) Value-at-Risk for Financial Derivative Instruments. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

With the continuous development of the financial industry, financial risk management is increasingly important, the use of scientific methods to do the risk measure also gradually become a hot field. In this paper, quantitative risk analysis method which is widely recognized by the financial industry is introduced. It is called Value-at-Risk (VaR). Value-at-Risk is one of the most popular ways to estimate risk of financial instruments. Abundant previous work focused on linear portfolio. The researches on nonlinear portfolio are rare. The linear approximations, such as delta-only model or variance-covariance method, will underestimate or overestimate VaR for nonlinear financial instruments or portfolios. This paper aims to examine characteristics of VaR for nonlinear portfolios. Thus, three classic methods which can be applied for nonlinear portfolio have been selected, historical simulation model, quadratic model, and Monte Carlo simulation model. Owing to this article includes introduction about various aspects of VaR models on nonlinear type of derivative instruments, it may be treated as an introduction about this particular field of

financial research.

Item Type: Dissertation (University of Nottingham only)
Keywords: Value-at-Risk (VaR), Historical simulation method, Quadratic simulation, Monte Carlo simulation method, nonlinear portfolio, Back-testing
Depositing User: EP, Services
Date Deposited: 25 Apr 2012 13:50
Last Modified: 25 Oct 2016 15:10
URI: http://eprints.nottingham.ac.uk/id/eprint/24832

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