This time we discuss the percentile approach – data is collected for specific percentiles/quantiles of loss severity from experts. In this tutorial we would discuss the Interval Approach. In the following illustrations, we will fit continuous distributions to scenario data collected for loss severities.

Operational risk modelling uses Loss Data Analysis (internal or external), Scenario Analysis and data on Business Environment and Internal Controls. Loss data analysis and Scenario Analysis require fitting probability distribution to loss data or scenario data i.e. identifying which distribution best describes the empirical or expert judgement data.

Financial Risk Manager Level I Value-at-Risk mainly consists of three parts – Calculating Simple VaR, VaR for Linear & Non-Linear Assets and Marginal VaR. Click “Read More” to view the presentation and the recording of the webinar.

What is the most I can lose on this investment? This is a question that almost every investor who has invested or is considering investing in a risky asset asks at some point in time. Value at Risk tries to provide an answer, at least within a reasonable bound.
It gives the likelihood that a portfolio will suffer a large loss in some period of time, or the maximum amount that you are likely to lose with some probability (say, 99%).
It finds this by :
(1) looking at historical data about asset price changes and correlations;
(2) using that data to estimate the probability distributions of those asset prices and correlations; and
(3) using those estimated distributions to calculate the maximum amount you will lose 99% of the time.
But the things are not as simple as that. Real markets don’t go by statistics or rules of probabilty.

In 18th century, a scientist found that the astronomical data he was studying, when plotted against the probability of occurrence gave him a bell-shaped curve, a statistician now knows that the weight of the adults in a city when plotted, will yield him a bell-shaped curve, and the physics professor at your college knows that [...]

Pristine organized a free one hour Webinar (live instruction training) on Value at Risk (VaR). The objective of the Webinar was to explain the concept of “Value at Risk” and its application in risk management context and FRM Examination.
Value at Risk is the most important concept in Valuation and Risk Modeling section as it forms the basic building block for concepts in measuring Risk. It gives the managers a handle on the risk that their firm is undertaking and can help in capital allocation and investment decision making.
In FRM Exam you can expect 7-10 questions on VaR and many more related concepts.