calculate the 1% monthly VaR in dollars, Using the historical method. Suppose you invested $15,000 in...

calculate the 1% monthly VaR in dollars, Using the historical method.

Suppose you invested $15,000 in the stock of XYZ company in early 2020. You have compiled the monthly returns on this stock during the period of 2015-2019, as given below.

2015	2016	2017	2018	2019
-0.0214	-0.0347	-0.1824	-0.0723	-0.1017
-0.0106	-0.0566	-0.0070	-0.1021	0.0264
0.0262	0.0158	0.0010	0.1114	0.1344
-0.1196	0.0862	-0.0648	0.2257	0.0786
-0.0313	0.0675	0.2378	-0.0043	-0.1772
-0.0362	0.0609	-0.0512	0.1867	-0.0953
-0.1137	-0.0203	0.1229	-0.0255	0.0978
0.0401	0.0100	-0.1156	0.1831	-0.1110
0.0129	-0.0230	-0.2416	-0.0360	0.1020
0.0652	0.1087	-0.2591	-0.0531	0.1099
0.1196	-0.1980	-0.0844	-0.0228	-0.0816
-0.0789	-0.0012	-0.0833	0.0170	0.0250

Expert Solution

Steps to Calculate VAR using Historical Method

a)Have all the 60 monthly return values under a column (Returns 2015-2019)

b) Multiply the return with your invested Capital (Returns 2015-2019 * Invested Capital (15000))

c)In another column ( Returns 2015-2019 in asending order ( R ) )paste the values of (Returns 2015-2019 * Invested Capital (15000)) and then sort it in ascending order

d) To calculate P&L you need to subtract your invested Capital 15000 from values under column (Returns 2015-2019 in asending order ( R )

e) Next to calculate 1% VaR in excel you can use the percentile formula in excel. =PERCENTILE(K2:K61, 1%) here K2 :K61 is our P&L ( R-15000) column . This will calculate 1% VaR as -3731.625

Returns 2015-2019	Returns 2015-2019 * Invested Capital (15000)	Returns 2015-2019 in asending order ( R )	P&L ( R-15000)	VaR	1 Month H-S Valuation
-0.0214	14679	11113.5	-3886.5	1.0000%	PERCENTILE(K2:K61,L2)
-0.0106	14841	11376	-3624		-3731.6250
0.0262	15393	12030	-2970
-0.1196	13206	12264	-2736
-0.0313	14530.5	12342	-2658
-0.0362	14457	13206	-1794
-0.1137	13294.5	13266	-1734
0.0401	15601.5	13294.5	-1705.5
0.0129	15193.5	13335	-1665
0.0652	15978	13468.5	-1531.5
0.1196	16794	13474.5	-1525.5
-0.0789	13816.5	13570.5	-1429.5
-0.0347	14479.5	13734	-1266
-0.0566	14151	13750.5	-1249.5
0.0158	15237	13776	-1224
0.0862	16293	13816.5	-1183.5
0.0675	16012.5	13915.5	-1084.5
0.0609	15913.5	14028	-972
-0.0203	14695.5	14151	-849
0.01	15150	14203.5	-796.5
-0.023	14655	14232	-768
0.1087	16630.5	14457	-543
-0.198	12030	14460	-540
-0.0012	14982	14479.5	-520.5
-0.1824	12264	14530.5	-469.5
-0.007	14895	14617.5	-382.5
0.001	15015	14655	-345
-0.0648	14028	14658	-342
0.2378	18567	14679	-321
-0.0512	14232	14695.5	-304.5
0.1229	16843.5	14841	-159
-0.1156	13266	14895	-105
-0.2416	11376	14935.5	-64.5
-0.2591	11113.5	14982	-18
-0.0844	13734	15015	15
-0.0833	13750.5	15150	150
-0.0723	13915.5	15193.5	193.5
-0.1021	13468.5	15237	237
0.1114	16671	15255	255
0.2257	18385.5	15375	375
-0.0043	14935.5	15393	393
0.1867	17800.5	15396	396
-0.0255	14617.5	15601.5	601.5
0.1831	17746.5	15913.5	913.5
-0.036	14460	15978	978
-0.0531	14203.5	16012.5	1012.5
-0.0228	14658	16179	1179
0.017	15255	16293	1293
-0.1017	13474.5	16467	1467
0.0264	15396	16530	1530
0.1344	17016	16630.5	1630.5
0.0786	16179	16648.5	1648.5
-0.1772	12342	16671	1671
-0.0953	13570.5	16794	1794
0.0978	16467	16843.5	1843.5
-0.111	13335	17016	2016
0.102	16530	17746.5	2746.5
0.1099	16648.5	17800.5	2800.5
-0.0816	13776	18385.5	3385.5
0.025	15375	18567	3567

jeff jeffy answered 2 years ago

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