Abstract

The Impact of a Drift on VaR

Wiese, A.

L-Bank, Karlsruhe

We consider a financial market where basic risk factors are given by a multidimensional geometric Brownian motion. In a Monte Carlo framework we empirically investigate the problem whether there are substanial differences calculating VaR when assuming that the returns of the risk factors have a zero mean or when using the estimated mean. The portfolios under inspection consist of several assets including puts and calls. We see that there are significant differences.