Bootstrapping value at risk (VaR)
January 16th, 2010
This is an illustration, using a simple portfolio of four stocks over one week, of the bootstrap method. Like the Monte Carlo, we want to simulate each stock (in the portfolio) forward in time. If today is time t, then we want to simulate the stock on t+1, t+2, t+3, etc. The key difference is: The Monte Carlo uses an algorithm (eg, geometric Brownian motion) to simulate the stock on t+1. In MCS, the randomness is applied in the algorithm; it informs the stochastic process But The bootstrap …
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hello maestro.
clear in your way to show your know how.i hope more about portfolio optimization
Hey Dave,
It is clear to me how you generate the numbers on row 19 via int(rand()*5)+1. What is not clear to me is how do you “attach” the contents (the column) to that generated number. Can you please explain? Post the formula? Thank you.
Thanks! This really helped me understand bootstrapping.