Abstract
The price of a position depends on the underlying assets or risk factors, and we express this price as the function p(S) of a scenario. A natural question to ask is how this price reacts to specific scenario changes. The particular price change resulting from a small change in only one of the underlying risk factors is called the sensitivity of the position with regard to that risk factor.
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- 1.
This is equivalent of using a 2200 × 2200 return matrix with only diagonal entries of 10−4.
- 2.
Convince yourself of this by mentally adding the bowstring approach’s overlapping triangles.
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Auer, M. (2018). Sensitivities. In: Hands-On Value-at-Risk and Expected Shortfall. Management for Professionals. Springer, Cham. https://doi.org/10.1007/978-3-319-72320-4_5
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DOI: https://doi.org/10.1007/978-3-319-72320-4_5
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Publisher Name: Springer, Cham
Print ISBN: 978-3-319-72319-8
Online ISBN: 978-3-319-72320-4
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