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Hi there
Please may you explain the concept on value added risk model and how it’s calculated.
Also please explain Monte Carlo simulation and what it is used for
Thanks
There is no such thing as the ‘value added risk model’ !!
Maybe you mean ‘value at risk’ in which case there is a page about it in the free revision notes on here.
With regard to Monte Carlo simulation, it really is unlikely to be asked and if it is then it cannot be calculations – just a brief mention in a written answer.
It is where we are uncertain about what will happen for various reasons. It is like putting into a spreadsheet all the various possibilities that can happen and seeing what all the possible outcomes would be as a result. We could then estimate the probability of various outcomes occurring.There is no such thing as the ‘value added risk model’ !!
Maybe you mean ‘value at risk’ in which case there is a page about it in the free revision notes on here.
With regard to Monte Carlo simulation, it really is unlikely to be asked and if it is then it cannot be calculations – just a brief mention in a written answer.
It is where we are uncertain about what will happen for various reasons. It is like putting into a spreadsheet all the various possibilities that can happen and seeing what all the possible outcomes would be as a result. We could then estimate the probability of various outcomes occurring.
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