VaR Mapping of Option Positions
1. Context
In this short video, we explore a basic mapping of European options (calls or puts) onto appropriate positions in underlying stock and dollar bills / zero coupon bonds. It helps us illustrate analytical approaches to VaR mapping, and how this simple mapping can help us both aggregate risk across positions as well has (more simply) compute VaR and/or perform stress tests. The details of the reading in which this topic appears are given below:
| Area | Market Risk |
| Reading | VaR Mapping |
| Reference | Philippe Jorion, Chapter 11. VaR Mapping In Value-at-Risk: The New Benchmark for Managing Financial Risk, 3rd Edition, (New York: McGraw- Hill, 2007). |