# Value at Risk: Model Validation

#### Qstat

##### New Member
I am new to the forum so I hope I am posting in the correct place.

PROBLEM:
As I am exposed to upper risk in one particular marketed security, I want to set 90 % upper confidence levels for 15 and 30 days going forward. The problem advances as I am tracking the 30 day moving average of this security and thus want the 90 % upper confidence levels for that rather than the daily rate. Although, I know that applying the daily rate would probably be better to determine the real risk but that is not possible/relevant here.
I have applied data from two years back.

PROPOSED METHOD:
1. Calculating 15 and 30 day return and standard deviation on the 30 day moving average
2. Calculating product of the 15 day standard deviation and the "NORM.S.INV(0,9)" Excel function. And do the same for 30 day.
3. Applying the 15 day result from point two above to the moving average rate to project the 15 day upper 90 % risk. And do the same for 30 day to project 30 day upper 90 % risk.

I am in doubt about using the moving average rate in point 3 above (in applying upper risk to the current moving average rate) as I know this is not the best predictor of the future rate (that's the observed rate for the day rather). But I suspect that it's best to use the moving average rate to set the upper risk levels as this is the rate we want the upper risk for in the end. Can you rationalize?

In addition, I would be grateful if you would please review my method and potentially come up with improvements, thanks!

BR