Anybody Can do Value at Risk: A Teaching Study Using Parametric Computation and Monte Carlo Simulation
Faculty of Business and Law
School of Accounting, Finance and Economics / Finance, Economics, Markets and Accounting Research Centre
The three main Value at Risk (VaR) methodologies are historical, parametric and Monte Carlo Simulation. Cheung & Powell (2012), using a step-by-step teaching study, showed how a nonparametric historical VaR model could be constructed using Excel, thus benefitting teachers and researchers by providing them with a readily useable teaching study and an inexpensive and flexible VaR modelling option. This article extends that work by demonstrating how parametric and Monte Carlo Simulation VaR models can also be constructed in Excel, thus providing a total Excel modelling package encompassing all three VaR methods.