7. Value At Risk (VAR) Models
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- čas přidán 5. 01. 2015
- MIT 18.S096 Topics in Mathematics with Applications in Finance, Fall 2013
View the complete course: ocw.mit.edu/18-S096F13
Instructor: Kenneth Abbott
This is an applications lecture on Value At Risk (VAR) models, and how financial institutions manage market risk.
License: Creative Commons BY-NC-SA
More information at ocw.mit.edu/terms
More courses at ocw.mit.edu
I think MIT is doing a great service to humanity by allowing people to see such lectures online. I will donate. I hope others do too. Together we can make education a right and not a privilege.
@@raulbartolome8389 Not all heroes wear capes, thanks man! :)
YES KNOWLEDGE FOR ALL
Agreed
Especially considering a conceited self-appraisal half the lecture. The fuck I care about who the teacher is. The best teachers talk about the subject non-stop, not their credentials.
So what? He seems an intelligent engaging and sympathetic teacher.
Best takeaway from the lecture: “Whats the difference between a bond and a bond trader? A bond matures.” 😂😂😂
🥲🤣🤣
Some notable Timestamps:
0:06:19 Methodology
0:38:33 Covariance, Correlation & Matrix algebra
0:46:50 The big picture
1:00:51 Monte Carlo
44:40 cookie
He might not have a PhD, but he is an amazing lecturer. Natural born teacher.
Thank you. I'd be a lesser teacher if I had a PhD. My value-add proposition is to explain how things are actually done.
It seems to me that he can empower people and has a lot of knowledge. So the PhD is just a title not a necessarily proof of knowledge.
Six years later and this is still an amazing lecture. Thank you so much!
This man is brilliant. We are very lucky. Thank you MIT for the content and the sourcing of brilliant lecturers
Along with explaining the concepts in simple and effective manner he gave life lessons too! Thanks a lot Sir!
Why are some people saying the video is useless. The lecturer is cool, did his best to simplify key concepts. i don't think they expected him to give a rigorous/detailed lecture. chill - and enjoy!
So relaxing to hear everyone coughing, miss these old days
Excellent teaching, well done! Been through a Bachelor and now doing my Masters', never found anyone being this easy to understand.
I'm glad you liked it.
So glad I saw this. This opened my mind wide open about finances. I need to study this more
This professor has an awesome way of teaching.
Thanks a lot to MIT and Mr. Abbott! A very lively and essential lecture.
Hi, I am a french student majoring in financial markets and I would have loved to have you as my teacher. You look so passionate, I envy your students. Thanks for the video!
Who is still bumping this 2019?
Why do you ask?
It’s 2023 but his lecture is still useful and plus points to Mr. Abott’s quirkiness and witty jokes hahahaha
The stats teacher we all wish we had. Thanks for the upload, MIT.
Very informative lecture and his sense of humor is on another level of graetness.
45:45 that was a great insight for simplifying portfolio volatility calculations... wow
The guy coughing at 29:03 reallllly pissed me off lol
I have to say a big THANK YOU to MIT for providing these lectures. Im currently doing a math/physics double major in NewZealand but I really want to become a quant. This has really opened my eyes to financial markets and the math involved. I am honestly at peace with all the mathematics as I understand most of it. For statistics however, I have done some physics labs that make the statistical concepts in this course reminiscent of the physics labs I have done but I dont know it to much detail; so i guess im gonna have to self study statistical theory.
hey oscar ,how ıs ıt goıng your beıng quant adventure?
Super interesting and informative teacher! I am a non-market risk professional at a global investment bank and loved every minute, thanks Ken hope you are well!
I am well, thank you very much. I'm glad you enjoyed it.
The instructor is very down to earth. I like it.
I wish attending one of your great, rich and well presented classes, great work
I love that "can I have a piece of that cookie" hahahaha
what a human moment
This lecture and the lecturer are amazing! Thanks for sharing it.
can't believe they are having such great courses online for free! Courses are very good.
Thanks Prof. Kenneth for this amazing lecture!
Thanks for this video it gave me the basic background I need to understand VaR in my Financial Engineering Module.
What an amazing teacher. Great lecture
I know this is late, but this greatly helps me understand the various scenes in Margin Call where they were discussing the potential upcoming losses. Not just that they were about to lose a huge pile of cash, but how they figured out that it was about to happen. Had no real clue or understanding of what VAR numbers meant.
Also FORTRAN & COBOL coder using cards. USAF required that I be able to read blank Hollerith Cards at 1 card per minute, Baudot paper table at 25 characters per minute. Am another of the ancient ones.
Unbelievable ! based on this video. i passed a counterparty risk job interview.
I'm glad it was useful for you.
The Cornish-fischer expansion technique is also very useful and practical for VaR
I wish this man was my mentor as I begin my journey. Great attitude and lecture.
I'm happy to provide any help I can.
@@kennethabbott8248 hi Ken ı realy need help about my life ı have to ask questions How can ı connect to you
post more videos of Mr. Abbott
Your tips help me become a better trader. Thank you very much for your time and effort!
2 Years later and this is still an amazing lecture.
Thanks
@@kennethabbott8248 No, thank you. Amazing lecture!!!
Mit VaR course conducted by a top speicalist from the industry... Just wonderful. Great uni and high class lecturer. Props for opening the course for outsiders like me. 👍 Ty mit and Ty lecturer Ken
Happy to be of use. Let me know if you have any questions.
This man is amazing. I would be honored to work with him.
somebody give this guy one more cookie!!!!
XD
Very helpful for people who are trying to self study this stuff. Thank you so much for the lecture and the anecdotes.
I'm happy to be of service.
his energy is infectious.
I love this guys, incredible amazing
if all my lecturers were as good as you, i would be going to every lecture happily
Incredible teacher! I just started my career in Financial engineering attribute and I cant agree more that never trust the data from others!!!
Thanks.
Same career
Wao. This is an awesome lecture on risk management. I love your sense of humor. Thank you sir.
Thanks. My wife thinks I'm just ok, though.
Loved this class. The comments about the sign of an FX contract in the position vector really clarified some practical issues to me. By the way, is that spreadsheet on Monte Carlo avaliable somewhere? Couldn't find it in the related MIT course page.
What an attitude....cool nerd!! Need more teachers like him
Thank you for making this available to everyone.
Excellent. I am so thankful for this video.
The lecturer is so good
I love this guy! Great lecture!
This lecture is amazing
Amazing Lecture!
This guy is hilarious, and doesn't use jargon. Keeps it very close to application and explains things well.
What a great teacher.. respect! Gratitude.!!
A true teacher, awesome indeed!
Thanks.
"Are you taking something for that?"
Me watching this in 2021.....
amazing lecture
At 30:30 you mentioned graphing the data - what do you look for in the graph? If prices are true random walks then what good is graphing the data?
I guess I will be able to replicate it myself, thanks Mr Kenneth for the keys of the KINGDOM
Goid vid. Like the experience and not theory perspective of bad data.
Amazing teacher
Great Content, Thank you MIT.
Nice lecture, thank you!
Awesome lecture! Lucky MIT kids.
I have a master degree in risk management. I have learnt almost all of the stuff, but I enjoyed it a lot! I love how it refreshes my memory and links my knowledge to practical world. And I liked the jokes haha.
All, there is an error on slide 40. The formula for the portfolio variance should be:
=MMULT(MMULT(A2:C2,E2:G4),TRANSPOSE(A2:C2))
then ctrl+shift+enter.
Despite the small error, spectacular video, thanks for posting MIT!
Kenneth Abbott, you are a great teacher, thanks for sharing your knowledge!
@Ken Abbott Haha, totally understand. Would you mind sending me your email? Would really appreciate having a contact like yourself for topics like this. Best!
abbottk (at) post (dot) harvard (dot) edu.
This is a cool lecturer , when I get money , I will donate.
Does somebody have the link to the spreadsheet with his Monte Carlo simulations?
You can use polar coordinates for correlation
Fantastic, fantastic lecture.
I'm glad you liked it.
@@kennethabbott8248 Mr. Abbott, where can I find related papers/journals from which I can read more about VAR, Portfolio, Options, Derivatives, etc related to finance? I believe that getting a good in-depth know-how of these things would be beneficial in the long run, atleast for me.
Thanks MIT ...Harvard you should take example of thé best education non profit approch
I wish they had a whole lecture series with this instructor.
I do a whole lecture series every year at Baruch in the MFE program. I teach undergrads, as well. Come sit in!
@@kennethabbott8248 Thanks! And thanks for the great work you put out!
(2020) thank you so so much for all those explanations ❤️
I'm glad you found it to be of use.
44:51 had me cracked up
what a great professor!!
Thanks
i love this guy !!!!!
Crazy fellow wonderful professor
You´re great, Ken!
Thanks. Quiero visitar El Salvador algún día.
0:31:53 Crazy... 9 years later and negative yields are common all around the world
Way better than LSE finance lectures
God bless you MIT
Wonderful and helpful lecture. Lively speaker with interesting professional experience. Thank you.
Also great to see a black female at MIT.
Thanks. I'm glad you liked it.
me still watching this video in 2024...
😂
Good. I am ready to play my part in next financial crisis now.
Great video MIT. Thanks for sharing
Hi There
Lecture is really very good as it is presented by experience quant.
Is there any possibility to get the Excel spreadsheet presented by Kenneth?
Thanks,
KP
Krunal Patel Sorry, the course materials do not include any Excel spreadsheets... but the course lectures notes do have a number of data tables on the slides that might be of some help? See the course on MIT OpenCourseWare for the course materials at: ocw.mit.edu/18-S096F13
Thank you! I could listen to you for ages! :)
My wife says I'm only "better than average". That's all I got after 25 years I guess.
KA
@@kennethabbott8248 Hahaha after 25 years that's pretty damn good!!! I've only been able to make it to 5, and my fiancee dropped my course...(then me...)
please do a video on monte carli simulation for calculated value at risk for a forex trade
Does anyone know the bibliography they use?
I love this guy, at 50.10 he had me dying laughing. Kenneth I will bring you an entire box of cookies to come sit in on one of your lectures.
Let me know when you're in NYC. You can sit in.
@@kennethabbott8248, Great lecture! definitely useful even not for quants (CS grad from Israel here)
@@kennethabbott8248 Sorry but at 52:15 that bit about Abe Lincoln and the Internet just fell completely flat 😂
@@HelloThisIsAnon Yeah. That one didn't go over.
I have spent so many years at several universities, I have never seen something like thatbefore!! I laughed out loud! That was genuinely funny!!!
About that last Monte Carlo simulation. When multiplying by normal random vectors is he underestimating the tails of the distribution? The syntetic data may conserve its standard deviation, but probably not the kurtosis (my point of view).
You are correct That is a known weakness and the reason most forms don't use MC for VaR. You can use a t-copula or make ex-post adjustments to calibrate the distribution. A gaussian copula makes more sense in doing Vasicek-type default models and counterparty risk.
Good one
What's the difference between a bond and a bond trader? The bond matures
LOLOLOL... I like the last line of Prof Ken's comment. And I will copy that as my tagline. LOLOL...
Tell you what? I will come back here again for the completed note. Too perplex with that log-ish chart. LOLOL
Please: how to do the final transformations in order to obtain the correlated synthetic data! A practical explanation of that would be most useful! Thank you for this video.
This might be useful: czcams.com/video/QCqsJVS8p5A/video.html
I wish I was in this lecture!!
Is it possible to calculate the Value at Risk for a series of regular investment? Or what is the more appropriate "Value at Risk" calculation for a series of regular investment
The VaR will change every time you change the portfolio unless you manage to add to in in a manner 100% consistent with its current composition. Even then, it will change as market conditions change. Email me at abbottk (at) post (dot) harvard (dot) edu if you want to discuss further.
During Monte Carlo Simulation, is the transformation matrix supposed to be E^(T) * lambda^(1/2) or lambda^(1/2) * E^(T) ?
The slide on the PPT says its the latter, whereas he writes the former on the board, and the Excel MMULT function follows the latter as well.
And IIRC, I don't think both formulae would yield the same results.
I was in error. It is lambda^(1/2) * E^(T)
Thank You for the clarification Professor. Really enjoyed your lecture. @@kennethabbott8248
Dear MIT team,
Is it possible to access the Excel spreadsheet of the lecture? Unfortunately, I cannot find it on the MIT courseware website.
Thanks for your contribution! Appreciate it a lot!
Send me your email. abbottk(at)post(dot)harvard(dot)edu