Value at Risk on the buyside

[wadswort]

Guys,
I understand what VAR is etc. etc. but, to me, it seems much more relevant of a statistic to the sell side than buyside.
Can someone please explain to me the value the VAR statistic can bring to a bond portfolio manager?

 

[Sanket Patel]

Just think about the question that VAR is trying to answer

 

[wadswort]

Right, but for a buy and hold bond manager, it seems that he/she wouldn't really care about maximum daily loss potential

 

[benzbubblecat]

Right, but for a buy and hold bond manager, it seems that he/she wouldn't really care about maximum daily loss potential

Explain?

 

[wadswort]

If I were a buy/hold bond manager, I would mainly be concerned with protection of principle. I'm not trying to time interest rates....just trying to earn a spread. When the bond matures, I get my $$ back. Thus, I don't care about daily fluctuations.

Thoughts? Would I still care?

 

[Sanket Patel]

Yes, you should still care, because don't forget, you still have to mark your books and report to your investors.

 

[alain]

Thoughts? Would I still care?

If it's your own money, it's up to you. If it's somebody else's money, you might have a problem