# Simulation-based Value-at-Risk for Nonlinear Portfolios

arXiv: https://arxiv.org/abs/1904.09088 · HTML: https://mlsanity.com/paper/1904.09088/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 19 Apr 2019.

## Built on by (most cited first, 1 of 1)

- [DeepMartingale: Duality of the Optimal Stopping Problem with Expressivity and High-Dimensional Hedging](https://mlsanity.com/paper/2510.13868/) (2025)

## Abstract (arXiv)

Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness, however, substantially diminishes when the portfolios concerned involve a high dimension of derivative positions with nonlinear payoffs; lack of closed form pricing solution for these potentially highly correlated, American-style derivatives further complicates the problem. This paper proposes a generic simulation-based algorithm for VaR estimation that can be easily applied to any existing procedures. Our proposal leverages cross-sectional information and applies variable selection techniques to simplify the existing simulation framework. Asymptotic properties of the new approach demonstrate faster convergence due to the additional model selection component introduced. We have also performed sets of numerical results that verify the effectiveness of our approach in comparison with some existing strategies.