Client Needs & Objectives
This experience is representative of our expertise in financial modelling. It demonstrates our knowledge of VaR models and their application to manage market risk. A VaR model represents the potential losses that can occur on a portfolio assets with a X% probability over a period t.
- Context: A 6-month assignment for the development of a Value at Risk model in order to manage market risk and meet regulatory requirements.
- Client: A private sector bank in Tunisia
Considering the portfolio characteristics of the Bank, a large part of the risk was carried by the equities. This risk relates to the volatility of the equities in the portfolios. Consequently, the objective for the Bank was to estimate that risk thanks to different VaR models. These models are the following:
- Estimation through historical observations
- Estimation of a Parametric VaR
- Estimation through the approach Variance-Covariance
- Estimation through Monte Carlo Simulation