VaR assymetry

potatochip · January 6th, 2003, 3:33 pm

There are 2 nonlinearities.1). Exponential shock of underlying is nonlinear.2). For some products, there is nonlinear relationship between underlying and derivative.In the "RiskMetircs" VaR, the VaR for linear products is the same whether you are long or short since 1). is taken care of by exp(x) ~ 1 + x and 2). does not exist.Can you analytically calc VaR if you want to 1. for linear products, include the .5x^2 term2. for nonlinear products, include convexity

Silvershark · January 6th, 2003, 3:47 pm

QuoteOriginally posted by: potatochipCan you analytically calc VaR if you want to 2. for nonlinear products, include convexityThe delta-gamma VaR approach could be used to account for convexity of non linear products, see the delta-gamma VaR thread on this topic.Regards