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04-04-2016 12:38 PM

Hello friends,

Need a clarification on delta normal analysis.

I am trying to estimate the portfolio VaR using a delta normal analysis where I have cosidered a variance / covariance matrix (user specified varified) for a multivariate model ( more than one risk factors).

While running the analysis I am getting the following error -

But the same matrix is working fine for a covariance based monte - carlo analysis.

Please help me in solving the issue.

Thanks,

Anindya

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04-12-2016 10:52 AM

Hello Anindya,

I have consulted with a Principal Research Statistician in the risk organization. He says that when risk complains about an aggregation having missing sensitivities, it is not complaining about the covariance or correlation matrix. Aggregations are subportfolios. The error is telling you that some subportfolio has missing values for its sensitivities. Either the value of a position is missing at perturbed Delta Normal state or the pricing method sets rf.der to missing for some risk factor. An error might seem extreme for this kind of problem, but any missing value invalidates the calculation of VaR for that subportfolio. As lower-level sensitivities percolate to the portfolio level, the portfolio level thus contains the same missing values, which invalidates the calculation of VaR there. We recommend you check your positions for missing values.

I hope this helps,

Michael Harvey