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

Brian G. Peterson brian at braverock.com
Mon Feb 2 15:28:37 CET 2009

megh wrote:
> 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.

Sorry to be late to this thread.  As others have noted, option portfolios are 
not normally distributed, so you need to take skewness and kurtosis into 
account at least, and depending on the complexity of your options portfolio, 
you may need to take the greeks on the options into account as well.

The R package PerformanceAnalytics includes functions for computing portfolio 
component VaR and Expected Shortfall using the Gaussian, Cornish Fisher, and 
Student-t approaches.   We've recently published papers in the Journal of Risk, 
RISK, and Computational Finance that describe these approaches.  these papers 
are referenced in PerformanceAnalytics, and I would be happy to make them 
available upon request.


     - Brian

Brian G. Peterson
Ph: 773-459-4973
IM: bgpbraverock

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