Get Up-to-Date with the Basel Committee Standards for the Use of VAR Models to Calculate Market Risk Capital Requirements.

DUBLIN, Ireland -- Research and Markets (http://www.researchandmarkets.com/reports/c27982) has announced the addition of E-Learning Course: Value at Risk (VAR) to their offering

The aim of this course is to provide users with an understanding of the concept of value at risk (VAR) as used in risk measurement, and to describe in detail the three alternative methodologies for calculating VAR. Topics covered in the course include the variance-covariance, Monte Carlo and historical simulation approaches to measuring VAR, the benefits/drawbacks of each of these three methods, the regulatory issues surrounding the use of VAR, backtesting, stress testing and extreme value theory.

In this course, you will explore:

--the basic VAR concept and the statistical theory behind it

--the variance-covariance, Monte Carlo and historical simulation approaches to calculating VAR

--Basel Committee standards for the use of VAR models to calculate market risk capital requirements 

--the concepts of backtesting, stress testing and extreme value theory in risk measurement

This course is designed for:

--senior managers

--new recruits to banking and financial organizations

--all risk management staff

--treasury department staff

--finance personnel

--IT staff

--compliance and regulatory staff

The following tutorials are included in this E-Learning course:

1. VAR - An Introduction

With the initial growth of the derivatives market in the 1980s, banks, regulators and other market professionals were all faced with more complex portfolios to evaluate and explain. Work done in the major trading banks in the early 1990s was instrumental in devising better ways to analyze portfolio risk. Value at risk (VAR), the result of this work and the subject of this tutorial, has subsequently become one of the key measures that risk managers use to understand the risks in a portfolio and to compare the risks in one portfolio with those in another.

On completion of this tutorial you will be able to:

--explain how value at risk is used to measure market risk

--describe the three methods for calculating VAR

--list the main advantages and disadvantages of VAR as a measure of risk

2. VAR - Variance-Covariance Approach

This tutorial examines the first of the three approaches to calculating VAR - the variance-covariance or parametric approach. Starting off with a simple, single-asset portfolio, the tutorial progresses to include more advanced VAR calculations for portfolios containing derivatives, incorporating concepts such as incremental VAR and interest rate dependent mapping.

On completion of this tutorial you will be able to:

--use the variance-covariance approach to calculate VAR for both single-asset and multi-asset portfolios

--use incremental VAR (IVAR) to identify the different contributions individual assets make to the overall VAR of a portfolio

--use mapping to calculate the VAR of portfolios that contain instruments with multiple cashflows

--calculate VAR for portfolios containing derivatives

3. VAR - Monte Carlo Simulation 

As options and other financial derivatives became more complex, the use of Monte Carlo simulation methods to price them became more popular. Today, many financial institutions with large derivatives portfolios employ this technique. This tutorial looks at how Monte Carlo simulations are applied to VAR calculations. Monte Carlo VAR is an important approach because it can be used for more difficult positions, such as those involving optionality, when other approaches such as variance-covariance are inappropriate.

On completion of this tutorial you will be able to:

--outline the Monte Carlo simulation approach to calculating value at risk (VAR)

--describe the benefits and problems that arise from using Monte Carlo simulations to calculate VAR

4. VAR - Historical Simulation & Other Issues

Historical simulation is one of the three most common approaches used to calculate value at risk. The use of real historical data, coupled with its ease of implementation, has made historical simulation a very popular approach to estimating VAR.

Apart from historical simulation, this tutorial also examines how techniques such as stress testing, backtesting and extreme value theory are used by risk managers.

On completion of this tutorial you will be able to:

--outline the historical simulation approach to calculating value at risk (VAR)

--describe the advantages and disadvantages of historical simulation

--explain the Basel Committees standards for VAR models and the backtesting of these models

--understand how and why stress testing is used in risk management

--describe the basics of extreme value theory

For more information visit http://www.researchandmarkets.com/reports/c27982.