TODAY_Présentation1 16 05 16

# TODAY_Présentation1 16 05 16 - BNF 2O4 RISK MANAGEMENT...

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MANAGEMENT OF RISKS FACED BY INSTITUTIONS School of Business - CUIB Buea, 16th May 2016 Ulrich D’POLA KAMDEM ( @dpolovich ) BNF 2O4 RISK MANAGEMENT

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CREDIT RISK CALCULATION The Value at Risk measures the potential loss in value of a risky asset or portfolio over a defined period for a given confidence interval. VaR is also the maximum loss over a target horizon within a confidence interval (or under normal market conditions) . In other words, when you calculate the VaR, you indirectly answer the following question: If none of the “extreme events” (i.e., low-probability events) occurs, what is my maximum loss over a given time period?
CONTD’ The VaR of a portfolio is made of three major pillars: The distribution of the return of the portfolio The distribution of the return is supposed to be normal. The level of confidence In general, we have two level of confidence: 95% and 99%. The target horizon If you want to have the losses for one N days, you just need to multiply the losses for ONE day by .

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The Parametric or Analytical Approach; or The Delta-Normal Method FOR ONE DAY :
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