VALUEATRISK
Estimate exposure to loss of your portfolio with the Value at Risk framework.
Description
Value at risk is a currency-denominated measurement of the loss a portfolio (or financial instrument) would experience over a specified investment horizon. This is a common method for assessing risk. The Excel Lab function allows you to estimate value at risk both at the end of an investment horizon as well as throughout the investment horizon (risk measured continuously, within-horizon).
See https://insights.windhamlabs.com/insights/rethinking-exposure-to-loss for an introduction to stress testing your portfolios and assessing a more realistic measurement of exposure to loss.
Syntax
The following describes the function signature for use in Microsoft Excel's formula bar.
Input(s)
| Argument | Description |
|---|---|
value | Required. Vector / scalar value of portfolio wealth. |
mu | Required. Vector / scalar value of portfolio return estimate(s). |
sigma | Required. Vector / scalar value of portfolio risk estimate(s). |
horizon | Required. Investment time horizon in the same time units of return and risk. |
threshold | Required. Threshold for tail risk, this determines the area of the probability distribution to evaluate. You can interprete this as one minus your confidence probability. |
estWithinHorizon | Optional. Logical flag (TRUE or FALSE) to indicate whether you would like to calculate the within-horizon risk measurement. If this argument is not specified, it defaults to false. |
Output(s)
Value at Risk estimate(s).
Example
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