Procter and Wager
Banking institutions Management project
KIMEP College or university
Kosherbay Aldiyar 20101117
Babashov Abylay 20101801
Description of the Excel data file
I. In this task we are going to employ two types of methods to be able to calculate the 10 days VA for the position in 10 year T-bonds with Risk Metrics method and situation in Euros using Traditional simulation. The models accustomed to calculate VAR are Risk Metrics and Historic back again simulation. And these are actions how we determined VAR of 10 year T-bonds using Risk Metrics: 1 ) We got info on coupon charge, yield, and maturity of T-bonds since March 12-15, 2011 in the website www.treasurydirect.gov/RI/OFNtebnd and fastened copy with the table to the project like a proof of each of our calculations installment payments on your We identified Duration and Modified Length. (When you open Stand out, in the 1 sheet we all begin to estimate duration and modified life long the connection. Using the Surpass formula, answers will be M equals to 9. 03 years and MD equals to almost eight, 942 years) 3. We all found the Price of the relationship. (To compute the price of the bond in the table in the T-bond we take price pertaining to 10 years which is 99, 585912 per 100$, then we converted it to actual price ( 0. 99585912 * 1000= 995. 85912) 4. All of us found a Standard Deviation. To begin with we gathered data regarding the 10 year T-bond in the website (http://www.federalreserve.gov/releases/h15/) and followed all the recommendations how to download it. And in addition inserted all of the data needed to excel record. Then in order to calculate common deviation we used the Excel formulation (go towards the fx, available select function and put the formula STDEV) and the answer you will get SD = 0, 200197 % 5. All of us estimated industry risk within the next 10 days using the Risk Metrics VAR formula plus the confidence level 00% (or 1% VAR). all the details we required we got above so we got 13135. thirty-two (the formula we employed was MD * price * SECURE DIGITAL * (10day)^(0. 5) * 2 . 33). And we likewise had to add that we are with 99% level of confidence sure that we can not lose much more than $13135. 32 over the up coming 10 days if interest rates will increase by zero, 200197 % during these week. But there is still 1% chance which our losses can exceed this kind of amount. II. The whole procedure for the calculations of week 1% VA (99% self-confidence level) in position of 10 million in Euro (Historic-simulation Method) demonstrated below step by step and followed the recommendations: 1 . Data about $/Euro. (From http://www.federalreserve.gov/Releases/H10/Hist/ copy and paste exchange rates above 2 season period. As you open Surpass file, there should be a lot of information about exchange price, but you will need to select just 501 findings and all pointless information erase, for instance: destroys etc) 2 . We modified $/Euro. (Euros to U. S$ with the last price 1 . 3076 $/Euro, 2013-03-15). 3. Declined the exchange rate simply by 1%. (To calculate you should take the previous exchange charge 1 . 3076 $/Euro 2. by zero. 99) 5. Revalue. (You just need to revalue using fresh depreciation price of 1, 294524 $/Euro) your five. Find delta. (Calculate difference in $; when the spot exchange level changed, or perhaps delta= $-130760) 6. Discover % alterations exchange charge. (To determine change percentage exchange costs for five-hundred observations (actually you need consider 501 observations), use formula (Using Stand out the first calculation must be like this [(new/previous) вЂ“ 1] * 100 or you can easily put another formula (new-previous )/previous*100 ) and result is definitely the same) several. Find gain/loss. (To estimate the real gain/loss you should grow delta by simply changes exchange rates for each observations. ) 8. Find worst loss/best gain. (Using Excel function (sort), you must find most detrimental loss and best gain. ) on the lookout for. Find 1% VAR pertaining to 10 days. (To calculate 1% VAR for 10 days with 99% level of confidence, take fifth worst loss (-195602.78109418) multiply by day 10^(0.5) and you may get answer $ 618550, 3049) and we can say that there is a 99% confidence level that the losses might...
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