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David Harper, a Banach Turtle, continues his series on Value at Risk mapping for FRM candidates. Following Phillip Jorian's assigned text, he explores Table 11.6 to illustrate how VAR mapping works with different financial instruments. Specifically, he focuses on mapping a forward contract, a linear derivative, to identify the key risk factors that impact its value. By mapping the portfolio to these risk factors, the essence of VAR mapping is realized. In this example, a 1-year forward contract to purchase 100 million euros is analyzed.
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