Value at Risk (VaR): Parametric Method Explained
Video Overview & Insights
Discover the essential risk management tool, Value at Risk (VaR), through a comprehensive explanation of the Parametric Method, also known as the variance-covariance method. This video breaks down the VaR Parametric Method into easy-to-understand steps, from defining the concept to calculating VaR at different confidence intervals. Learn how to specify crucial inputs for VaR and master the calculations for both 95% and 99% confidence levels using this widely-used approach. Whether you're a finance professional or student, this tutorial by Ryan O'Connell, CFA, FRM, will enhance your understanding of risk quantification using the VaR Parametric Method.
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Dear Ryan, hi.
Please advise if the formula for parametric VaR = mean + standard deviation * percentile is correct or should use your formula = mean - standard deviation * z-score?
I want to use it for operational risk VaR calculation.
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Chapters:
How did you get z score. Isn't it 1.96 for normal distribution.
0:00 - Definition of the Parametric Method
0:24 - Specifying the Inputs to Value at Risk (VaR)
1:27 - Calculate Value at Risk (VaR) @ 95% Confidence Interval
2:37 - Calculate Value at Risk (VaR) @ 99% Confidence Interval
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