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Impact of standard deviation on var calculation (using value at risk software)

I'm trying to calculate var using a type of value at risk software and I'm getting a few errors in my reports. I'm trying to double-check my calculation, but I'm not sure how the standard deviation would impact var and this might be what is causing the error...
Pretty new to this so any help would be great.
--Stacey
 

David Harper CFA FRM

David Harper CFA FRM
Staff member
Subscriber
Hi Stacey,

VaR is a distributional quantile, such that, in analytical (aka, parametric) VaR, VaR is a multiple of the standard deviation. The distribution is unlikely to be normal, but for illustrative purposes, if the distribution is normal, the 95% (relative) VaR = 1.645*standard deviation because the 5th (5%) quantile (percentile) is +1.645 standard deviation from the mean; i.e., based on this particular distribution, 5% of outcomes will be > 1.645 standard deviations. The deviate (1.645) will vary by distribution (a heavy tailed distribution will have a deviate greater than 1.645 at 5%) but can generally be expressed as some MULTIPLE of the standard deviation, such that to increase the confidence is the same as decreasing the significance and increasing the deviate. Hope that helps, David
 
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