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Deimantas

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## Homework Statement

Calculate 5-day 1% Value at Risk of a portfolio using Monte Carlo simulation.

## Homework Equations

## The Attempt at a Solution

I've found an article explaining how to perform Monte Carlo simulation on portfolio returns therefore calculating the Value At Risk (pdf attachment). I've followed all the instructions and implemented it in Excel (zip attachment).

There are 3 main methods to estimate the VaR of a portfolio - historical simulation, parametric approach and Monte Carlo simulation. Historical simulation gives 5-day VaR=566.59, parametric approach gives 5-day VaR=486.92, and here Monte Carlo simulation gives 5-day VaR equaling around 360. I doubt the Monte Carlo result is accurate (seems way too low). I'm afraid there might be some errors in my excel implementation. I'd appreciate it if someone could kindly help me spot them.