Risk Module | VaR, Stress Testing & Limits

CRITICAL UNDERSTANDING

All risk models are wrong, but some are useful. VaR tells you nothing about losses beyond the threshold. Expected Shortfall improves on VaR but assumes you can accurately estimate tail behavior. Stress tests only work if you imagine the right scenarios. Use these tools to structure your thinking, not to replace it.

Interactive Tools

VaR Calculator

Compute Value at Risk using parametric, historical, and Monte Carlo methods.

Multiple methodologies
Confidence level selector
Holding period adjustment

Expected Shortfall Engine

Compute ES/CVaR for coherent tail risk measurement beyond VaR.

Historical simulation
Parametric estimation
ES vs VaR comparison

Stress Test Designer

Build historical and hypothetical stress scenarios with portfolio impact analysis.

Historical replay (1987, 2008, etc.)
Custom scenario builder
Correlation adjustments

Correlation Analyzer

Examine correlation stability across regimes and stress periods.

Rolling correlation
Regime detection
Breakdown alerts

Risk Decomposition

Break down portfolio risk into factor and security-level contributions.

Marginal VaR
Component VaR
Factor risk contribution

Limit Monitor

Track VaR, drawdown, and concentration limits with breach alerting.

Multi-tier limits
Escalation logic
Utilization tracking

Backtest Engine

Validate VaR models with exception counting and statistical tests.

Kupiec test
Christoffersen test
Traffic light approach

BUILD Exercises

BUILD 1

Historical VaR Implementation

Build historical simulation VaR with proper P&L calculation

FOUNDATIONAL

BUILD 2

Monte Carlo VaR

Implement correlated multi-asset Monte Carlo simulation

INTERMEDIATE

BUILD 3

Expected Shortfall Calculator

Compute ES from historical and parametric approaches

INTERMEDIATE

BUILD 4

Stress Test Framework

Build scenario engine with historical and hypothetical scenarios

ADVANCED

BUILD 5

VaR Backtesting System

Implement exception counting and statistical tests