VaRTimePeriod

The VaR time period context value works in conjunction with the Liquidity Horizon field.

Example

• If you set 10 day and 1 day in the Scenario table’s Liquidity Horizon field and in the UI the context value VaRTimeperiod is 1, then the 10 day vectors VaR will be normalized to 1 day, while the 1 day vectors VaR will stay the same.

• Similarly, if the context value is changed to 10, then the 10 day vectors VaR will not change and the 1 day vectors VaR will be scaled to the 10 days.

You will see a ‘10day VaR’ measure and a ‘1DayVaR’ measure side by side.

• 10 day VaR and 1 day VaR should not be aggregated (liquidity horizon should be slicing)

Rule

The rule applied follows the Square Root of Time rule. That is:

To scale a 1 day VaR to a 10 day VaR: $$VaR_{n-days} = VaR_{1-day} \cdot \sqrt{n}$$

To scale a 10 day VaR down to 1 day: $$VaR_{1-day} = \frac{​VaR_{10-day}}{\sqrt{10}}$$