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Value at Risk Simulation

Students take control of portfolios under pressure - quantifying risk, stress-testing positions, and setting capital buffers - in our Value at Risk Simulation.

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Value at Risk Simulation Overview


The Value at Risk (VaR) Simulation immerses students in the role of financial risk managers, giving them real-time responsibility for quantifying potential losses, interpreting VaR models, and making capital allocation decisions in response to market movements.

Developed by risk professionals and financial educators, this simulation brings statistical concepts into a practical setting. Students must not only calculate risk - but act on it - adjusting portfolios, responding to shocks, and preparing reports for internal and regulatory stakeholders.

Ideal for courses in financial risk management, trading, or banking regulation, this simulation builds intuitive understanding of how VaR informs real-world decisions.
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Value at Risk Simulation Concepts


Students gain applied experience with key risk management principles, including:

  • Value at Risk (VaR): Historical, variance-covariance, and Monte Carlo methods

  • Confidence Intervals and Holding Periods: Interpreting 95% vs 99% VaR

  • Portfolio Risk Aggregation: Diversification effects and correlation structures

  • Stress Testing: Evaluating the impact of extreme but plausible events

  • Capital Adequacy and Risk Limits: Setting limits and calculating economic capital

  • Backtesting VaR Models: Comparing predicted vs actual losses

  • Regulatory Context: Basel guidelines and internal model validation

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What Students Do


Students act as risk managers overseeing a trading portfolio at a financial institution. Across multiple simulation rounds, they will:

  • Calculate VaR using different models and data sets

  • Interpret and explain changes in portfolio risk

  • Advise on hedging strategies or exposure reduction

  • React to news events and apply stress scenarios

  • Prepare internal VaR reports for simulated stakeholders (e.g., CRO, regulator)

  • Backtest VaR predictions against realized portfolio performance

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What Students Learn


This simulation transforms VaR from a static formula into a living risk management tool. Students will learn how to:

  • Understand and compare multiple VaR methodologies

  • Use VaR to identify vulnerable exposures in a portfolio

  • Make portfolio-level decisions under uncertainty

  • Justify capital buffers based on market volatility and correlation

  • Communicate technical results to non-technical audiences (boards, regulators)

  • Recognize the limitations and blind spots of VaR-based models

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Why This Value at Risk Simulation Works


VaR is often taught through equations and spreadsheets - but in real firms, it drives high-stakes decisions.

This simulation brings context, urgency, and consequence to statistical risk concepts. By managing portfolios in changing markets and seeing how risk metrics hold up - or break down - students internalize how VaR supports (but doesn’t replace) human judgment.

Perfect for advanced undergraduates, MBA students, and executive learners, this simulation prepares future risk professionals to navigate both model output and market reality.
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Frequently Asked Questions


  • Do students need to know statistics or coding? Basic statistical concepts (mean, standard deviation, correlation) are useful. No coding is required - the simulation calculates models automatically and provides visual breakdowns.

  • Can instructors choose between different VaR models? Yes. You can choose historical, parametric (variance-covariance), or Monte Carlo simulation-based approaches depending on course depth.

  • How long does the simulation take? Typically 2–3 hours for a full VaR cycle, including stress tests and reporting. It can also be extended across multiple sessions for deeper analysis.

  • Group or individual play? Both are supported. Group play encourages role specialization (quant analyst, portfolio manager, compliance officer).

  • How is performance assessed? Based on accuracy of VaR calculations, effectiveness of responses to market events, and clarity of communication in risk reporting.

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Enquire

Webinar 03 Nov 2025 00:00

Join this 20-minute webinar, followed by a Q&A session, to immerse yourself in the simulation.

or

Private Demo

Book a 15-minute Zoom demo with one of our experts to explore how the simulation can benefit you.