VaR mapping commodity forwards

[afterworkguinness]

Hi,
In relation to how the convenience yield on commodity forwards complicates things, Jorion says "As a result, the risk measurement of commodity futures uses Equation (11.11) directly...". He doesn't give a description of how to map the forward to primitive risk factors. Does that statement mean no mapping can be done ?

 

[ShaktiRathore]

Hi
I think its possible to map commodity forwards but the convinience yield complicated the things and it becomes difficult to mapping these forwards. Jorion cites the formula being used for mapping but didnt gives the mapping process does not mean that mapping cannot be done.
Thanks

 

[Jhoony]

Hi
Can anyone clarify how to select the 95% VaR from historical datasets. Out of 100 losses the worst 7 are: 99$, 98$, 97$, 96$, 95$, 94$, 93$.
In this case 95% VaR is 95$ (the fifth loss) and EL if loss > VaR is 97,5$ ((99+98+97+96) /4). Is this correct, because sometimes 94$ (the 6th loss) is used for VaR and EL changes to ((99+98+97+96+95)/5) = 97$.

In addition the EL sometimes include the VaR threshold e.g. 95$, so that EL becomes 97$ instead of 97,5$ in past GARP exames.

This is absolutely confusing. Do you have a view what to use on the exam?

Thanks

 

[ShaktiRathore]

Hi
ES always calculates average of 5% of tail((1-CL)% in general) or avg of worst 5 losses for 95% CL. So ES of (99+98+97+96+95/5)97$ is valid.
Var has 3 valid definitions as 5th worst loss/6thworst/avg of above 5th and 6th worst losses.(please refer to GARP 2015/2014 Sample papers to know exactly which method is recommemded by them.)
Please see and read this thread carefully: https://forum.bionicturtle.com/thre...uld-i-include-the-100th-loss.7532/#post-27906
Thanks