Document Type thesis Author Name Kondapaneni, Rajesh URN etd-050905-104553 Title A Study of the Delta-Normal Method of Measuring VaR Degree MS Department Mathematical Sciences Advisors Arthur Heinricher, Advisor Keywords VaR Delta-Normal Method Date of Presentation/Defense 2005-05-05 Availability unrestricted
This thesis describes the Delta-Normal method of computing Value-at-Risk. The advantages and disadvantages of the Delta-Normal method compared to the Historical and Monte Carlo method of computing Value-at-Risk are discussed. The Delta-Normal method of computing Value-at-Risk is compared with the Historical Simulation method of Value-at-Risk using an implementation of portfolio consisting of ten stocks for 400 time intervals.
Based on the normality of the distribution of the portfolio risk factors, Delta-Normal would be suitable if the distribution is normal and Historical Simulation method of calculating Value-at-Risk would be ideally suited if the distribution is non-normal.
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