VAR- LookBack Period

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archived_user

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Hi there,
can you tell me what is the lookback period and why its so important to VAR?
I do not understand how the choice of the lookback period can affect the result of var
 
@s2000magician I am not sure to have understood the use of the lookback period
 
Look back period is also known as WindowSize or Sample Window.
For example, for APPLE you want to calculate 1day 95%tl Parametric VAR. You can select past 1 year trade data or 6 months trade data. 1 yr/ 6 mnths is your lookback period and volatility in case 1 and case 2 will be different so the Parametric VAR
 
lookback period is one of the disadvantages of VAR. As student 1 could be looking at relative performance of a security of last 1 yr. another student 2 could be looking at relative performance of a security of last 3 month. Student 1 might observe price appreciation.student 2 might observe price going sideways. Therfore, difference in time would effect VAR in a similr fashion
 
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