Calculating Value at Risk

Calculate the Value at Risk (VaR) for a sample investment portfolio by running a Monte Carlo simulation in IBM® Spectrum Symphony. A Monte Carlo simulation relies on repeated random sampling to obtain numerical results and is typically computationally intensive. Use this sample simulation to see how IBM Spectrum Symphony can accelerate time-to-results for such workload by breaking down workload tasks and running them in parallel.

1. From the cluster management console, go to Workload > Symphony > Applications.
2. Select Demo7.3.2 in the application list and click Enable to enable the application.
   Tip: To improve your results, set the application to be prestarted in the preStartApplication parameter of the Demo7.3.2 application profile (see Consumer section).
3. In the application's properties, expand the demonstration section in the Summary tab and click the Monte Carlo Simulation link to launch the sample web portal.

   You can also directly enter the URL of the sample web portal in a supported web browser. For example, enter https://Host_M:8443/demo, where Host_M is the fully qualified name of the cluster management console host.

   The Value at Risk (VaR) Simulation Sample window opens.

4. If you want to change the sample data used for the simulation, update the equity portfolio. You can change existing equity values, add new equities, or remove existing ones (see Updating equity data to calculate Value at Risk).
5. In the Monte Carlo Configuration section, check the following parameters:
   • Number of days: Time horizon for the simulation, representing the period over which the loss might be realized. Default is monthly (22 working days).
   • Number of 10K simulations: Number of iterations of each 10K simulation to run. Default is 20 (which translates to 200,000 iterations for each equity).
   • Degree of confidence: Confidence level, expressed in percentage, at which to estimate VaR. Default is 99 percent.
6. In the Max cores for simulation section, select the maximum number of cores that can be used to run tasks in the computation. Default is 1 core. Set this value to one more than the desired maximum (allowing one extra core to be taken up by the application's parent session). With a higher maximum, workload tasks are distributed on more cores and run in parallel. The higher the number of cores, the faster results can be returned.
   Tip: To make more cores available to the application, you can change the application's resource group in the resourceGroupName parameter of the Demo7.3.2 application profile (see Consumer section).
7. If the Number of days and Number of 10K simulations are set to a significantly high value, but Max cores for simulation is low, increase the Max time to complete simulation (default is 5 minutes). With fewer cores but more days and more 10K simulations, the calculation requires a longer time to complete. Increase the max time value to prevent the simulation from timing out before it completes.
8. Click Calculate VaR.
   1. When prompted to log in, enter a user name and password and click Log in. You can use the default credentials for the built-in cluster administrator account (user name Admin, password Admin).
   2. Click Calculate VaR (not required).

   To stop and cancel the simulation anytime, click Cancel VaR simulation.