Most banks using HS VAR also opt to compare results with VAR calculations using Monte Carlo Simulation

1. hisham's writing pad/VAR/Monte Carlo
VAR Calculation using Monte
Carlo Simulation

2. hisham's writing pad/VAR/Monte Carlo
Examples of Models used in Monte
Carlo VAR
● Geometric Brownian
Motion
● Box-Jenkins
● Markov Chain● Nelson & Siegel

3. hisham's writing pad/VAR/Monte Carlo
Steps to implement MC VAR
● Set up with appropriate models
● Enter various portfolios ex: fixed income (sukuks), equities, FX,
derivatives
● Upload the yield curve data for fixed income currency-wise
● Upload price data for stocks
● Determine thresholds
– Confidence Interval ex: 99%
– Determine period ex: 10 days