Value at Risk book
See how ten physical and paper positions combine after correlation and hedge netting—and why the example book still exceeds its one-day VaR policy limit of USD 100,000.
Read the VaR framework in the bookIllustrative 95% one-day VaR
A ten-position trading book
Switch positions on or off and change their exposure. MATIF and FFA positions can reduce related physical risk, but the starting book still breaches its USD 100,000 policy limit.
Limit
Advanced detailEdit the ten-position bookOptional · 10 of 10 positions included
Read portfolio effect before switching a line off. A positive number adds to current VaR. A negative number is providing hedge or diversification benefit, so removing it can make risk rise. A 95% one-day VaR is a modelled threshold, not the worst possible loss.
| In book | Position | Risk factor | Direction | Exposure, USDm | Daily volatility | Standalone VaR | Portfolio effect |
|---|---|---|---|---|---|---|---|
| Long Constanta wheat | Wheat cash | Long | 1.2% | $59,220 | +$23,716 | ||
| Long Polish wheat | Wheat cash | Long | 1.2% | $39,480 | +$18,611 | ||
| Long French wheat | Wheat cash | Long | 1.2% | $39,480 | +$18,611 | ||
| Long Black Sea wheat | Wheat cash | Long | 1.2% | $39,480 | +$18,611 | ||
| Short MATIF March | MATIF | Short | 1.1% | $45,238 | -$20,317 | ||
| Short MATIF May | MATIF | Short | 1.1% | $45,238 | -$20,317 | ||
| Long Supramax FFA | FFA | Long | 2.5% | $30,844 | -$7,913 | ||
| Long Panamax FFA | FFA | Long | 2.5% | $30,844 | -$7,913 | ||
| Fixed freight sale: Durban | Freight sale | Short | 2.8% | $69,090 | +$17,091 | ||
| Fixed freight sale: Abidjan | Freight sale | Short | 2.8% | $69,090 | +$17,091 |
Answer explainedWhy does the result move?Open or close the model FAQ
This is a transparent parametric teaching model with fixed illustrative volatility and correlation assumptions. It is not the book's historical-simulation route model and must not be used as a production risk number. A 95% VaR is a modelled threshold, not a maximum loss.
VaR95 = 1.645 × √(net factor exposure′ × covariance × net factor exposure)