Search results

It seems to me that you misinterpreted the last sentence in my previous post. What I was saying is that I believe that these types of discussions should be done in the mathematical language of formulas, not in spoken word. I wasn't claiming that my previous post were using this approach, instead...

I am in agreement with you on how VaR should be calculated in the two cases: normal asset prices and log-normal asset prices. What I am not 100% comfortable with is the use of the relative change of asset prices to define "normal returns" - this does not seem consistent with the two common...

I see. Thank you for this background information. Let me try to define precisely(-ish) what I mean. In my experience, the two basic assumptions for the distribution of asset prices are normal and lognormal, where the former means that the asset price flows a normal (aka Gaussian) distribution...

Yes, indeed it was a bit "dramatic", but it is nevertheless true - I have worked as a risk qaunt for over 10 years now and haven't encountered a stochastic process were the ratio of asset values is used to define a model for asset returns. If you know of one then I would be very interested in...

Thank you for your reply, but I believe there is a mistake in your second point: (a) arithmetic return is just a simple arithmetic different between values, not a ratio (hence the name); and (b) log-return is just a logarithm of a ratio of values, without 1 being deducted. From these it can be...

Great video! Thank you. I have a question: could you please explain how in Normal VaR calculations you obtained relative % drift and relative % standard deviation for arithmetic returns. Doesn't the assumption of arithmetic returns implies that the drift and standard deviation are expressed in...