Monte Carlo estimation of value-at-risk, conditional value-at-risk and their sensitivities

Authors:
L. Jeff Hong;Guangwu Liu
Affiliations:
The Hong Kong University of Science and Technology, Kowloon, Hong Kong;City University of Hong Kong, Kowloon, Hong Kong
Venue:
Proceedings of the Winter Simulation Conference
Year:
2011

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Abstract

Value-at-risk and conditional value at risk are two widely used risk measures, employed in the financial industry for risk management purposes. This tutorial discusses Monte Carlo methods for estimating value-at-risk, conditional value-at-risk and their sensitivities. By relating the mathematical representation of value-at-risk to that of conditional value-at-risk, it provides a unified view of simulation methodologies for both risk measures and their sensitivities.