I have a question to all acquainted with CESR’s Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS (https://www.esma.europa.eu/sites/default/files/library/2015/11/10_788.pdf).
On p.26, box 15 it is pointed out that:
- The calculation of the absolute and relative VaR should be carried out in accordance with the following parameters:
© effective observation period (history) of risk factors of at least 1 year (250 business days) unless a shorter observation period is justified by a significant increase in price volatility (for instance extreme market conditions);
(d) quarterly data set updates, or more frequent when market prices are subject to material changes;
(e) at least daily calculation.
What means quarterly data set updates? Do they mean that I have to calculate VaR every day but I am allowed not to update the equity (for example) prices daily and to use an old covariance matrix?
I know that this board is predominantly American but I cannot find a forum dedicated to UCITS (an European phenomenon) so I will be glad if you can help me with the question and maybe with the forum.