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  #21  
Old 02-14-2011, 06:32 PM
Hawkeye16 Hawkeye16 is offline
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Nene, as the documentation says... the particular numbers in each assignment are different and generated the first time you open and run the document. You remember this when you firt opened your excel file I hope.

I believe that may be one cause of different numbers.
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  #22  
Old 02-14-2011, 06:49 PM
LU2005 LU2005 is offline
 
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I am running scenarios with number of assays and min to mine amounts changing and I keep getting negtive VaR amounts. Does anyone know what this means?
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  #23  
Old 02-15-2011, 10:15 AM
Hawkeye16 Hawkeye16 is offline
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I forget how the VaR is set up in this worksheet but if you change just 1 assumption that you know will hurt the profits (i.e. the cost of borrowing) and the VaR gets more negative, it means that a negative VaR is actually negative and a bad thing. If it gets less negative (closer to or above zero) then it is as explained online someplaces and a lower VaR is a good thing.

I assume you already know what VaR is.
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  #24  
Old 02-15-2011, 10:26 AM
LifeTilt LifeTilt is offline
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Did you guys actually read any of the stuff on VaR or CTE? It's all in the modules.

Negative VaR just means negative profits. Ie, Var(90)=-5 means that at the 90th percentile, you are expected to lose $5. Not complicated stuff here.
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  #25  
Old 02-15-2011, 11:51 AM
LU2005 LU2005 is offline
 
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thanks for the explanation. I guess I always understood VaR as a loss. So even though VaR was positive, it represented the probability that a loss was greater than $x.

Since we are evaluating the asset value at the end of the period, a positive VaR means profit and a negative VaR means loss?
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  #26  
Old 02-15-2011, 12:14 PM
Hawkeye16 Hawkeye16 is offline
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Quote:
Originally Posted by LifeTilt View Post
Did you guys actually read any of the stuff on VaR or CTE? It's all in the modules.

Negative VaR just means negative profits. Ie, Var(90)=-5 means that at the 90th percentile, you are expected to lose $5. Not complicated stuff here.
Some people read stuff on Wikipedia that explained it differently with VaR(90)= +5 being a loss of 5.

I agree with what you say here though as the way that the reading explained it and the way it should be. I just did not want to give incorrect advise since I have seen discussions about it here. Thought I would instead give a way to understand it without relying on the given formulas/descriptions.
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  #27  
Old 02-15-2011, 05:02 PM
LifeTilt LifeTilt is offline
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Quote:
Originally Posted by LU2005 View Post
thanks for the explanation. I guess I always understood VaR as a loss. So even though VaR was positive, it represented the probability that a loss was greater than $x.

Since we are evaluating the asset value at the end of the period, a positive VaR means profit and a negative VaR means loss?
Yes, that's all it is. That's why you'll see that as you run some simulations and make things worse (ie, increase costs), you'll see the VaR values getting more negative. It just means that at the 90th percentile, you are now expected to lose even more money.
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  #28  
Old 02-23-2011, 04:47 AM
foxpro foxpro is offline
 
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I have problem in task 3, I find the standard deviation keep increasing when the number of assay increase...it seems wrong...
The VaR also a negative number as well for any scenarios...
After all, will it be right if i choose higher minimum to mine value like 0.942 as the VaR is the least negative among the others but the % of reopening the mine is the smallest...
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  #29  
Old 02-23-2011, 09:30 AM
Hawkeye16 Hawkeye16 is offline
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I would not worry about reopening the mine as much. That number is important, but definitely not the most important. I would focus on the possible worst case scenario losses, expected profit and variability more than anything as those are the "statistics".
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  #30  
Old 02-23-2011, 09:54 AM
foxpro foxpro is offline
 
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The hedging ratio is also a problem, hedging cannot benefit the firm at all as the simulation of the gold price is too high compared to the forward price...seems the firm should not do any hedging...
If the actual decay rate is higher, the ending balance even worse...
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