Ch 6: Value at Risk

About This Chapter

If you're having a hard time understanding value at risk, get ready for a test or finish your homework with this engaging chapter as your guide. We've put together a collection of short lessons and self-assessment quizzes designed by professional instructors you can access any time.

Value at Risk - Chapter Summary

In this chapter, you'll find short easy-to-understand lessons on value at risk to help you fully understand these concepts. Subjects covered here include risk exposure and the key elements of value at risk. Feel free to go back and review the lessons as many times as needed to ensure your comprehension. The lesson quizzes and chapter test also help to identify any areas where you're struggling and might need to focus your attention. If you still have questions, reach out to one of our experts through the Dashboard. After completing this chapter, you should be able to:

  • Define risk exposure, its analysis and evaluation
  • Outline the key elements of value at risk
  • Calculate value at risk using the variance-covariance method
  • Discuss the historical simulation for calculating value at risk
  • Use the Monte Carlo simulation in risk management
  • Detail method comparisons and overall limitations for value at risk

5 Lessons in Chapter 6: Value at Risk
Test your knowledge with a 30-question chapter practice test
Key Elements of Value at Risk

1. Key Elements of Value at Risk

Along with the return they hope to get, investors are also concerned with the risk of losing big dollars. Value at Risk (VaR) is a set of statistical tools that allow investors to quantify risk. Let's look at what is needed to use VaR tools.

Value at Risk: Method Comparisons & Overall Limitations

2. Value at Risk: Method Comparisons & Overall Limitations

Investors often worry about the risk of losing big dollars. Value at risk (VAR) tools give them a way to approximate how much those losses might be with a certain confidence level. Let's go through three ways to calculate VAR.

Historical Simulation for Calculating Value at Risk

3. Historical Simulation for Calculating Value at Risk

Investors like to hear about the prospects for big gains in investments, but what about the risk for big losses? Value at Risk tools can quantify the answer. We will illustrate the historical simulation method with an example and explanation.

Variance-Covariance Method for Calculating Value at Risk

4. Variance-Covariance Method for Calculating Value at Risk

Investors get excited about the profit opportunities for investments, but they need to consider the risk of big losses too. We will consider the variance-covariance method of calculating value at risk, which quantifies the chances for big losses.

Using the Monte Carlo Simulation in Risk Management

5. Using the Monte Carlo Simulation in Risk Management

In this lesson, students will learn how the Monte Carlo simulation enables testing of preliminary task estimates to help reduce project uncertainty and risk.

Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
Not Taken
Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
Not Taken

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