Anybody can do Value at Risk: A Teaching Study using Parametric Computation and Monte Carlo Simulation

The three main Value at Risk (VaR) methodologies are historical, parametric and Monte Carlo Simulation.Cheung & Powell (2012), using a step-by-step teaching study, showed how a nonparametric historical VaRmodel could be constructed using Excel, thus benefitting teachers and researchers by providing them with areadily useable teaching study and an inexpensive and flexible VaR modelling option. This article extends thatwork by demonstrating how parametric and Monte Carlo Simulation VaR models can also be constructed inExcel, thus providing a total Excel modelling package encompassing all three VaR methods.