VAR//haircut calculations

[chitrader]

does any1 have a easy numerical example how to calc
1.var
2.regulatory haircut capital

also ive read somewhere that var=2.33*2.5%*net value trade

where does the 2.33 come from?

is that standard deviation?

Thanks

 

[A Dashing Blade]

1) Goolgle "Calculating VAR" , there are at least 5 links on the first page that explain this (serious).
2) Any danger of you mentioning exactly which regulatory authority and exactly which products you're talking about?

 

[chitrader]

well its not so much the math behind but rather an intuitive approach...
if a bank gives a trader 10,000,000 capital they prob. want a 20% return(2,000,000)
then a var of 500,000 is realistic?
too big,too small
this with a commodity asset with rougly 42% vol/yr

 

[chitrader]

1) Goolgle "Calculating VAR" , there are at least 5 links on the first page that explain this (serious).
2) Any danger of you mentioning exactly which regulatory authority and exactly which products you're talking about?

would you know the rel ship between risk capital and var?

"if a trader gets 10,000,000 capital bank probably wants 20% return(2,000,000)
a var of 500,000 (1day) is realistic i.e p/l over var a 4:1 ratio

im trying to figure out what a realistic risk capital is versus a given var

thanks!

 

[MrGecko]

VaR comes with a time condition.

VaR = "The most the Bank can expect to lose after XX days if conditions are as usual but things go badly""

Moreover, VaR is usually used for a portfolio of assets, not a single asset alone.

P.S. Do the sums

 

[chitrader]

ok var definition i get but i dont get is the RELATIONSHIP var and risk cap

10mio capital wants 20% yield=2,000,000
given a single asset which is indeed overly simplified what would you say VAR should be?
500,000?

VaR comes with a time condition.

VaR = "The most the Bank can expect to lose after XX days if conditions are as usual but things go badly""

Moreover, VaR is usually used for a portfolio of assets, not a single asset alone.

P.S. Do the sums