Fixed Income Value-at-Risk with Python

Risk management is an important function in any organization especially financial institutions and banks. Risk management as a process has multiple steps. A key step in this process is the risk measurement of the portfolio. There are various measures that are deployed by firms to monitor various types of risk. For instance, Duration measures the interest rate sensitivity of the portfolio, Beta is used to measure sensitivity of the asset to a broad market index etc. However, by far the most prevalent measure adopted by the industry is called Value at Risk (acronym “VaR”). The beauty of VaR as a measure is that it gives one single number that encapsulates the entire risk to which the portfolio is exposed to. In this post we will discuss a model for fast calculation for VaR of a Fixed income portfolio by using Python. We will compute the 99% 1 day VaR of the portfolio.

Founder: FinQuest Institute;

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