![]() ![]() You can download the Excel template used in the video here. The second tutorial demonstrates the calculation of value at risk with Monte Carlo simulation in Excel. The first one defines VaR and demostrates the calculation of parametric VaR deterministically based on historical mean and variance. There are two video tutorials included focused on value at risk with Excel. ![]() Value at Risk Monte Carlo Simulation in Excel The drawback is it is not possible to estimate how large a loss may be if the downside move exceeds the confidence level. When calculating VaR, we are actually calculating a mean VaR based on some pre-specified confidence level. So for a 95% confidence level VaR represents a downside movement of 1.645 sd and for a 99% confidence level it represents a downside move of 2.33 sd. VaR is supposed to represent a worst case scenario such that there is a low probability that actual losses will exceed the calculated VaR.
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