[R-SIG-Finance] [R-sig-finance] Conponent VaR for someoption portfolio

[davidr at rhotrading.com]

Component VaR aside, Value-at-Risk is very difficult for options
and non-linear instruments in general. A number of years ago
RiskMetrics tried to use a delta-gamma approximation, but they
abandoned it soon since it really didn't work very well. You
may be able to find a paper or two on it somewhere under that name or
quadratic VaR, but many of them have been pulled.
(Check RiskMetrics.com and GloriaMundi.org.)
Finding the distribution of option values under an assumption of 
a distribution assumption for the underlying is hard. 
Taking volatility skew and such into account makes it harder.
It may be an interesting exercise to compute it, but using simulation
is going to be much easier and more useful in the end. Just make sure
you use a distribution for the underlying that has fat enough tails.

My 2 cents.
David L. Reiner, PhD
Head Quant
Rho Trading Securities, LLC


-----Original Message-----
From: r-sig-finance-bounces at stat.math.ethz.ch
[mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of megh
Sent: Friday, January 30, 2009 7:07 AM
To: r-sig-finance at stat.math.ethz.ch
Subject: Re: [R-SIG-Finance] [R-sig-finance] Conponent VaR for
someoption portfolio


Hi  Guy , thanks so much. This document is really useful. Although I
think
that will serve most of my purposes, still I found that they adopted
Simulation approach to calculate all those analytics. My question is
that,
is it possible to have those under Parametric approach?

Thanks and regards,


Guy Yollin-2 wrote:
> 
> I've used this paper as a guide to implementing cvar decomposition in
> R/S-PLUS:
> 
> Yamai, Yasuhiro & Yoshiba, Toshinao, 2002.
> "Comparative Analyses of Expected Shortfall and Value-at-Risk: Their
> Estimation Error, Decomposition, and Optimization,"
> Monetary and Economic Studies, Institute for Monetary and Economic
> Studies, Bank of Japan, vol. 20(1), pages 87-121, January.
> 
> It's available here:
> 
> http://www.imes.boj.or.jp/english/publication/mes/2002/me20-1-4.pdf
> 
> Best,
> 
> -- Guy
> 
> 
> -----Original Message-----
> From: r-sig-finance-bounces at stat.math.ethz.ch
> [mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of megh
> Sent: Wednesday, January 28, 2009 9:21 PM
> To: r-sig-finance at stat.math.ethz.ch
> Subject: [R-SIG-Finance] [R-sig-finance] Conponent VaR for some option
> portfolio
> 
> 
> Can people here please guide me how to calculate Componrnt VaR
> (sensitivity)
> of an option position, for a portfolio which consists of number of
stocks
> and option contracts (put ot call or both). Any document, research
paper
> over net is highly appreciated.
> 
> Thanks
> --
> View this message in context:
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> 
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