Futures Returns and Spread Changes in VaR calculations

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john_wang
Posts: 1
Joined: Wed Nov 19, 2014 1:22 pm

Futures Returns and Spread Changes in VaR calculations

Postby john_wang » Thu Nov 20, 2014 5:06 pm

Hello,

My question relates to the consideration at the same time as risk factors:
1) Futures
2) Spreads
The reason is that I have futures and also spreads in my portfolio.

The assumption concerning futures is that returns are normal, while spread changes are normal.
I wonder if I should consider, for VaR calculations, futures returns and spread changes when I compute the risk factors correlation matrix. That is the correlation between futures returns and spread changes.
Also, I wonder if the volatility for spreads should be the volatility of spread changes, while the volatility of futures should be the volatility of futures returns.

Summarizing, I wonder if it is consistent to consider in the same system volatilities and correlations mixing returns and changes whenever I take into account futures or spreads, respectively.

Please, I would appreciate any help.
Thank you

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