A Unified VaR Approach

This paper describes a possible approach for determining the Value at Risk (VaR) of a generic port-folio whose value changes depend on the variable conditions of financial markets. After reviewing some specific problems relative to the calculation of VaR, three examples are presented: The first one deals with interest rates, the second with stocks and the third with exchange rates. In the section on interest rates we present a VaR measure that is consistent with the perfect fit of the model; in the section on stocks we determine the VaR relative to long and short positions on highly non-linear portfolios (hedges, vertical and calendar spreads, combinations); finally, in the section on exchange rates we show how VaR changes according to the reference currency. The more technical parts of the paper are contained in three appendices.