MSc Project

Discussion in 'Risk Management' started by HMSc, Jun 12, 2009.

  1. HMSc



    I'm a Masters student and I'm doing a project this summer involving commodity trading. What I hope to achieve is to develop a risk monitoring tool using VaR models in Excel (using the programming language VBA).

    However, as I have no experience of trading in the stock market I'm not sure what would be beneficial for this tool to do. I don't want to spend three months working on something to find out that traders would never use it. So I would really appreciate it if people (traders) told me what they think would be useful for me to get this tool to do.

    Also I am focusing on data from the precious metals market (namely gold, silver and platinum) so if anyone knows any useful sites I could use for information/data I would really appreciate it if you would let me know

  2. Most commodity traders use stops and a system with some success rate W. The probability that a commodity account will fall X% depends on 1-W and the average loser. For example, a fall of one average loser has probability (1-W). A fall of 2 average losers in a row has probability (1-W) X (1-W) and so on.

    VaR is not a specific number but a system of evaluating risk. If you want to know the probability that a commodity position (account) will fall X% in 1 day then you must calculate the volatility of the commodity. ATR is a good measure for that. If ATR is 2% and the position can lose L amount due to such drop, then the probability of losing L amount in 1 day is 2%.

    Traders have simplified things bankers and other bandits have made extremely complicated to confuse people. I do not think you will come up with something traders don't know but you may learn something for yourself.
  3. moo


    You can stick the VaR where the sun doesn't shine. The recent crisis should have proved to everyone its uselessness.
  4. liujs


    I did a crude VAR spreadsheet BEFORE I took a formal course on risk management years ago as a school project. Not much for a first or second year student back then. So it's based on historical returns only. Not any parametric distribution, e.g. student t distribution or normal. PM me for it, but do prepared for some disappointment.
  5. sjfan


    Can you explain what VaR is and how it's calculated? Didn't think so. Please, go on, resume ranting

  6. Dobbes


    There's also a lot of free VaR spreadsheets on the internet so you don't have to start at square one.
  7. computing parametric VaR is very easy if you've taken a semester of stats and econometrics; it's not quantum physics. That's the problem. How do you calculate VaR so as to accurately estimate the risk of rare events?
  8. sjfan


    For equity, it's extremely easy. Your point is exactly right. I was addressing moo, who was clearly (and boorishly) talking about a concept he didn't understand.