Setting VaR + TE limits
Posted: September 18th, 2011, 9:04 am
by zak
How does one go about determining appropriate VaR and Tracking Error limits for an investment strategy, with no track record but with some idea of the targeted volatility of the strategy?
Setting VaR + TE limits
Posted: September 18th, 2011, 12:07 pm
by mg298
You could assume the returns are normally distributed (or whatever you believe they are) and back out the VaR (which would be using the same distribution) given your targeted volatility?Of course if you believe your returns are student-t, your target return volatility doesn't mean so much...