- VALUE AT RISK PROBABILITY BY JOHN A. RICE VIDEO LECTURE LICENSE
- VALUE AT RISK PROBABILITY BY JOHN A. RICE VIDEO LECTURE PLUS
- VALUE AT RISK PROBABILITY BY JOHN A. RICE VIDEO LECTURE SERIES
So the value at risk is defined with a positive sign. So this is a subtle difference when you look at the definition of the value at risk. If I'm a finals guy, so finals guys are used to use a minus, so for a finals guy, you don't lose $1 million, but you will lose minus $1 million. I will lose $1 million with a positive side. An actuarial standard, so for an actuary, when I look at a loss, the loss has a positive side. And this is why the value at risk by convention and this is what you will find in the recommendation of the Bazaar committee, the value at risk is defined with a positive sign. So if I look at the definition, the value at risk is in fact, can be viewed as a capital as a safety caution.
VALUE AT RISK PROBABILITY BY JOHN A. RICE VIDEO LECTURE PLUS
So that when I consider the return on my portfolio plus my value at risk, the sum of the two have a probability that this sum is negative will be equal to 1 minus alpha. when the event is very simple I look at the return of my portfolio which is denoted by RT and I will add something, and that something is called the value at risk. So is alpha is equal to 99%, 1 minus alpha will be equal to 1%, and I look at the 1% probability and I look at the probability of which type of event. So the first formula correspond to a probability level and I can see that the poverty level is 60 equal to 1 minus alpha. So let me now be a little bit more formal in terms of the definition and look at the formula. Okay, so this is in the definition of the value at risk. So to be concrete, if my value at risk is equal to $1 million loss, it means that I will have a 1% probability level to have a loss above that $1 million. And that level corresponds to the level so that I have a 1% probability level to be above that value at risk through that level. And as you can see in the right tail I have a level which is called the value at risk. So when you look at the value at risk here you focus on the right tail of the loss distribution. So we see that we have the loss distribution and here the loss distribution is symmetric but it doesn't need to be symmetric. So, what is the minimum loss level? So that you can have for a given probability. So, what is the value at risk? So you have a very informal definition which so in deed a quantitive and a very synthetic risk measure and the value at risk try to address very simple question. The first question is what is a value at risk or how can we define the value at risk? And the second question that we will address is how can we compute that value at risk in practice.
VALUE AT RISK PROBABILITY BY JOHN A. RICE VIDEO LECTURE LICENSE
Permissions beyond the scope of this license may be available at this contact page.Hi I'm Olivier in this session I will talk about the value at risk and how we can use that value at risk. Lecture 22: Testing the fit of a distribution generating random samplesĮngineering Probability by Rich Radke is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. Lecture 18: Sums of random variables and laws of large numbers Lecture 16: Conditional PDFs Bayesian and maximum likelihood estimation Lecture 15: Joint expectations correlation and covariance Lecture 14: Two random variables (continuous) independence Lecture 13: Two random variables (discrete) Lecture 12: Functions of a random variable inequalities Lecture 11: Expected value for continuous random variables Lecture 10: The Gaussian random variable and Q function Lecture 9: Probability density functions and continuous random variables Lecture 8: Cumulative distribution functions (CDFs) Lecture 7: Conditional probability mass functions
Lecture 4: Independent events and Bernoulli trials Lecture 2: Axioms of probability and counting methods Lecture 1: Experiments, Sample Spaces, and Events You may also be interested in my annotated course lectures for Digital Signal Processing, Introduction to Image Processing, and Computer Vision for Visual Effects.
VALUE AT RISK PROBABILITY BY JOHN A. RICE VIDEO LECTURE SERIES
While these long lectures still have good content, please take a look at my Probability Bites lecture series instead.
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