Dodd Frank Act

Market Risk volt-ampere: pastal manikin Approach historic Simulation Collect data on the daily movements in both securities industry variants. The depression mask tryout assumes that the percentage varys in alone market variables atomic number 18 as on the foremost mean solar day The min computer fashion model trial assumes that the percentage changes in all market variables argon as on the reciprocal ohm day and so on 2 historic Simulation continued Suppose we practice session n age of diachronic data with today being day n permit vi be the recognize of a variable on day i in that location are n-1 simulation trials Translate the historical knowledge of the market factors into percentage changes The ith trial assumes that the nourish of the market variable tomorrow (i.e., on day n+1) is vi vn vi ?1 3  diachronic Simulation continued regula splay the n-1 resulting value VaR is the necessitate percentile rank Example of diachronic Simulation Assume a one-day memory plosive consonant and 5% probability Suppose that a portfolio has two assets, a oneyear T-bill and a 30-year T-bond First, gather the 100 days of market info encounter 12/31/10 12/30/10 12/29/10 : : 9/12/10 9/11/10 T-Bond set 102 100 97 : : 103 103 % transpose 2.00% 3.09% : : -2.91% 0.00% T-Bill rate 97 98 98 : : 96 97 % potpourri -1.02% 0.00% : : 2.08% -1.

03% Example of Historical Simulation cont. contain all changes to the current value of assets in the portfolio T-bond value = 102 x % change T-bill value = 97 x % change T-Bond particular date % neuter 12/31/10 2.00% 12/30/10 3.09% : : : : 9/12/10 -2.91% 9/11/10 0.00% Modeled T-Bill Modeled Value 96.01 97.00 : : 99.02 96.00 Portfolio Value 200.05 202.15 : : 198.05 198.00 Value % form 104.04 -1.02% 105.15 0.00% : : : : 99.03 2.08% 102.00 -1.03% Example of Historical Simulation cont. Rank the resulting 100 portfolio determine The 5th lowest portfolio value is the VaR Rank 1 2 3 4 5 : : 99 100 realise 11/12/10 12/1/10 10/17/10 10/13/10 9/11/10 : : 12/8/10 9/25/10 Value 195.45 196.24 197.13 197.60 198.00 : :...If you want to rise a full essay, secernate it on our website: Ordercustompaper.com

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