Calculate your VaR the easy way!

The late Sir Dennis Weatherstone of J P Morgan requested that a firm-wide report on portfolio risk be known to the top management at 4:15 PM every working day, so that they had an inkling of an idea of what kind of market risk their portfolio carried. Although the gist of Value At Risk has been in existence even before , the idea as it is know today, is credited to J P Morgan.

If you are a trader , the metric will tell you what is your worst loss in your portfolio say tomorrow with a probability attached to that number. You could lose $100,000 in 1-day with a 99% confidence and so on.

VaR calculations can range from the very easy to very hard depending on the portfolio , the models used and the assumptions taken therein. However these days there are many ways to calculate VaR easily.

If you are a derivatives trader it is ideal that you have some idea of the risk your portfolio is assuming. I have created an easy way to help you calculate VaR if you know some basic python.

Assume your portfolio.csv looks like this:

Make sure you have named all your csv columns correctly as shown. Also make sure the values in various cells are strings or numbers as the case may be. Follow the lines in the image below.

Voila! That would create a VaR report for you.

So according to the above report for your simulated portfolio the 1-day VaR is approximately-375K and this is the worst you can lose with 99% confidence!