Procter and Gamble
Financial Institutions Management project
KIMEP University
Kosherbay Aldiyar 20101117
Babashov Abylay 20101801
Spring 2013
Description of the Excel file I. In this project we are going to use two types of methods in order to calculate the 10 days VAR for our position in 10 year T-bonds with Risk Metrics method and position in Euros using Historic simulation. The models used to calculate VAR are Risk Metrics and Historic back simulation. And these are steps how we calculated VAR of 10 year T-bonds using Risk Metrics: 1. We got information about coupon rate, yield, and maturity of T-bonds as of March 15, 2011 from the website www.treasurydirect.gov/RI/OFNtebnd and attached copy of the table to the project as a proof of our calculations 2. We found Duration and Modified Duration. (When you open Excel, in the 1 sheet we begin to calculate duration and modified duration of the bond. Using the Excel formula, answers will be D equals to 9.03 years and MD equals to 8,942 years) 3. We found the Price of the bond. (To calculate the price of the bond from the table of the T-bond we take price for 10 years which is 99,585912 per 100$, then we converted it to actual price ( 0.99585912 * 1000= 995.85912) 4. We found a Standard Deviation. First of all we collected data about the 10 year T-bond from the website (http://www.federalreserve.gov/releases/h15/) and followed all the instructions how to download it. And also inserted all the data needed to excel file. Then in order to calculate standard deviation we used the Excel formula (go to the fx, open select function and put the formula STDEV) and the answer you will get SD = 0,200197 % 5. We estimated market risk over the next 10 days using the Risk Metrics VAR formula and the confidence level 99% (or 1% VAR). all the information we needed we got above so we got 13135.32 (the formula we used was MD * price * SD * (10day)^(0.5) * 2.33). And we also had to add that we are
KIMEP University
Kosherbay Aldiyar 20101117
Babashov Abylay 20101801
Spring 2013
Description of the Excel file I. In this project we are going to use two types of methods in order to calculate the 10 days VAR for our position in 10 year T-bonds with Risk Metrics method and position in Euros using Historic simulation. The models used to calculate VAR are Risk Metrics and Historic back simulation. And these are steps how we calculated VAR of 10 year T-bonds using Risk Metrics: 1. We got information about coupon rate, yield, and maturity of T-bonds as of March 15, 2011 from the website www.treasurydirect.gov/RI/OFNtebnd and attached copy of the table to the project as a proof of our calculations 2. We found Duration and Modified Duration. (When you open Excel, in the 1 sheet we begin to calculate duration and modified duration of the bond. Using the Excel formula, answers will be D equals to 9.03 years and MD equals to 8,942 years) 3. We found the Price of the bond. (To calculate the price of the bond from the table of the T-bond we take price for 10 years which is 99,585912 per 100$, then we converted it to actual price ( 0.99585912 * 1000= 995.85912) 4. We found a Standard Deviation. First of all we collected data about the 10 year T-bond from the website (http://www.federalreserve.gov/releases/h15/) and followed all the instructions how to download it. And also inserted all the data needed to excel file. Then in order to calculate standard deviation we used the Excel formula (go to the fx, open select function and put the formula STDEV) and the answer you will get SD = 0,200197 % 5. We estimated market risk over the next 10 days using the Risk Metrics VAR formula and the confidence level 99% (or 1% VAR). all the information we needed we got above so we got 13135.32 (the formula we used was MD * price * SD * (10day)^(0.5) * 2.33). And we also had to add that we are