Delta and VaR

krishman14 · October 14th, 2015, 12:06 pm

Hi,Can anyone explain how a reduction in Long Equity Delta and increase in long equity vega results in a decrease in the VaR number?My assumption is that decrease in Delta will have a negative impact on P&L which should increase the VaR not decrease.Br,Manu

rmax · October 14th, 2015, 4:02 pm

If it is reducing your risk exposure, there will be last probability for a large loss (or gain) hence your VaR will reduce.

trdrisk · October 16th, 2015, 9:05 pm

actually it decreases your sensitivity and it ends up decreases your Var number. you will see in your backtest as well