Analytical VAR - option

[FrankCFA]

Analytical VAR is the need to assume a normal disdtribution. What’s the best way to measure the option risk? Thanks.

 

[Galli]

binominal model?

 

[Unemployed]

VAR with Monte Carlo simulation, where underlying is the stock price assumed to follow normal distribution.

 

[S2000magician]

Unemployed wrote:VAR with Monte Carlo simulation, where underlying is the stock price assumed to follow normal distribution.

Or, more likely, a lognormal distribution.

 

[Unemployed]

^ you are right. Returns are usually assume to be normally distributed, price lognormal.