Hi all
everybody knows what it means to calculate value-at-risk with a 95%
confidence level.
What about the reciprocal "upside potential" which refers to the highest 5%
of the distribution?
Would you consider more natural to say a) "your investment has an upside
potential of X with a confidence level of 95%" or b) "your investment has
an upside potential of X with a confidence level of 5%"
In my opinion the latter is preferable, because your gain will be >= X in
the 5% of scenarios. Anyway the former is implemented in QuantLib (see
http://quantlib.org/reference/a01138.html).
Thoughts?
If anyone wants a quick check/update about the statistics and risk measures
available in QuantLib you can download (a preview of) QuantLibXL 0.3.8 and
an example spreadsheet from
http://quantlib.org/StatsRisksXL.zip------------
ciao -- Nando
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