Var calculations ? Expousres

Skill Leverage said:
OK, so I believe that quantitative analysis of historical tendencies definitely has merit, because then you're talking about the analysis of previous human behaviour which I believe can have merit. I still see it only as a background to what you're seeing happening in front of you. With regards to analysis of value, I'm of the personal belief that the fair value of anything is what someone is willing to pay for it.
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I am in agreement with that, although the last point, as it is, is too circular for me to act upon... Therefore, I try to estimate what other people would be willing to pay for something by looking at either what they pay for other, comparable things or what they have paid for this thing in the past.
 
Sure, I didn't make that clear, of course we have to do that or markets wouldn't go anywhere. For example, my market is bid 121.92 at the moment, but I bet when we get to 122.00 there will be a bunch of people willing to buy it there... we'll see soon enough I imagine :)
 
I'd say so GJ, and that's testament to the different worlds in which we operate - I firmly believe a person could make a shedload of cash trading the Bund without even knowing what a yield curve was.
 
To each their own, no disagreement here and I would not put down any method/technique that people use to make money, no matter how much I may disagree with it... All I am saying is that it's useful to understand what you're really doing and the real reasons why it works.

As to your original point, GJ, I am not entirely sure what you're referring to...
 
I would not invest in something that I did not understand.............but each to their own.
 
It's all good Martinghoul; I'm just of the opinion that understanding other traders is a lot more important than understanding the theory behind markets. For example, today's ADP number is a predictor to a number which, in my theoretical opinion, shouldn't move the market anywhere near as much as it does - that said, I understand that locals will happily get on the bandwagon and sell the **** out of Bunds, just because a few less people may have lost their jobs this month than was expected. They then realise that ADP is pretty much pantywaist, and the market comes all way back, now trading above where it was pre-figure. Why don't people realise that ADP means nothing to the fair value of a 10yr bond in the long run, and just ignore the figure? I have no idea, but it doesn't mean I won't short the sh*t out of the thing when it does start to roll.
 
GammaJammer said:
the thread is full of people talking about stuff that is not really related to Risk Management in a structured framework at all (i.e. scalping the bloody bund).
Click to expand...

Bringing the thread back on topic...

... there might be a good case for retail traders using VaR against their own returns; given enough trade history (and by scalping the Bund you can run up a pretty decent sample size in a fairly short space of time, although it is not that straighforward).

Using VaR on an asset instead of stops, for a short term trader, is largely a waste of time IMO (as per original comment), but doing a VaR of your trade returns might have some legs - i.e. I can be XX% sure that I'm not going to blow up before next weekend.
 
I'm just at a loss as to how anyone puts faith in VaR at all tbh. I can only see a use in number crunching to take a report to some management type who doesnt really understand the job but maybe thats the accountant in me shining through lol.

I dont understand how risk can be quantified - esp as a percentage - but then I don't really know the ins and outs of what factors are considered in the calculations.

Can I ask some of you professional people using assessing active trades as an example, at what point would you consider using a VaR calculation over just calculating maximum equity at risk by checking stops against openings?
 
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Quick off the subject question. GJ what kind of gain do you think the gov't are in for if/when they put the bank shares tehy acquired back on the market?
 
This discussion is entirely what's wrong with the world right now; you let a load of guys with more A-Levels than friends get their hands on a load of cash, trying to mathematically model something which has far too many variables and intangibles to ever be modeled effectively. Cue people like GammaJammer and UKtrader sitting around scratching their heads because they didn't factor a Keynesian certainty into their poorly-conceived equations, while the people with their finger on the market's pulse - in the most basic of all senses - clean up.

SL
 
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