Market Risk Measurement - VaR and Beyond › Key Parameters
Michael BrenndoerferDecember 20, 20251 min read
Quantitative FinanceAll chapters Part 10 of 15Risk Management and Financial Risk Controls
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The market risk models implemented here rely on several key parameters:
- n_obs: The lookback window for historical simulation (504 days).
- n_simulations: The number of scenarios generated for Monte Carlo methods (10,000).
- degrees_of_freedom: The shape parameter for the t-distribution (), controlling tail heaviness.
- weights: The portfolio allocation vector across assets.
- confidence_level: The probability threshold () for VaR and ES calculations (95% or 99%).