vartools 0.0.7

A Python library for Value at Risk (VaR) calculations

VaR Calculation Library

Overview

This Python library provides functions to calculate the Value at Risk (VaR) and Conditional Value at Risk (cVaR) for financial portfolios, including stock and forex portfolios. These risk measures help in understanding potential losses under given confidence levels. It also allows you to conveniently download price data from Yahoo Finance and perform portfolio optimization using multiple strategies.

Features

• Download stock price data.
• Calculate VaR and cVaR for a stock portfolio.
• Calculate VaR and cVaR for a forex portfolio.
• Supports both long and short positions.
• Outputs results in both percentage and cash value.
• Rebalance a stock portfolio.
• Portfolio optimization for multiple strategies.

Installation

Ensure you have the required dependencies installed:

pip install scipy
pip install numpy 
pip install pandas
pip install yfinance
pip install matplotlib

Functions

get_data(stocks, start_date, end_date, type)

Parameters

• stocks (list): List of stock tickers to download.
• start_date (str): Start date in the format YYYY-MM-DD.
• end_date (str): End date in the format YYYY-MM-DD.
• type (str): Type of price to retrieve (e.g., "Adj Close", "Close").

Returns

• pd.DataFrame: A DataFrame containing the selected price type for the specified stocks.

Note: If you prefer to directly download the data from yfinance it is encouraged a format like this:

stocks = ["AAPL", "TSLA", "AMD", "LMT", "JPM"]
data=yf.download(stocks, start="2020-01-01", end="2023-01-01")['Adj Close'][stocks]

Also if you get the data from an excel or csv file create the list stocks or currencieswith the name of the columns in your file for correct functioning.

var_stocks(data, n_stocks, conf, long, stocks)

Calculates the VaR and cVaR for a stock portfolio.

Parameters:

• data (pd.DataFrame): DataFrame containing stock prices.
• stocks (list): List of stock tickers.
• n_stocks (list): Number of stocks per ticker.
• conf (float): Confidence level (e.g., 95 for 95%).
• long (bool): True for long position, False for short position.

Returns:

A DataFrame with the following columns:

• Métrica: "VaR" and "cVaR".
• Porcentaje: The percentage value of risk.
• Cash: The risk in monetary terms.

Note: Utilize this function when you have the number of shares of each stock instead of the weights.

var_forex(data, positions, conf, long, currencies)

Calculates the VaR and cVaR for a forex portfolio.

Parameters:

• data (pd.DataFrame): DataFrame containing forex currency pair prices.
• currencies (list): List of currency pairs.
• positions (list): Number of units per currency pair.
• conf (float): Confidence level (e.g., 95 for 95%).
• long (bool): True for long position, False for short position.

Returns:

A DataFrame with the following columns:

• Métrica: "VaR" and "cVaR".
• Porcentual: The percentage value of risk.
• Cash: The risk in monetary terms.

rebalance_stocks(w_original, target_weights, data, stocks, portfolio_value)

Calculates the number of shres to buy/sell to rebalance a stock portfolio..

Parameters:

• w_original: list of floats representing the original weights of each asset in the portfolio.
• target_weights: list of floats representing the target weights of each asset in the portfolio.
• data: pd.DataFrame with historical stock prices, where columns represent different stocks.
• stocks: list of stock tickers (column names in the data DataFrame).
• portfolio_value: float representing the total value of the portfolio.

Returns:

• A pd.DataFrame showing the original weights, target weights, and the number of shares to buy or sell for each asset to rebalance the portfolio.

var_weights(data, weights, conf)

Parameters

• data (pd.DataFrame): DataFrame containing historical stock prices.
• weights (list or np.array): Portfolio weights corresponding to each stock.
• conf (float): Confidence level (e.g., 95 for 95%).

Returns

• var (float): The Value at Risk (VaR) at the given confidence level.
• cvar_pct (float): The Conditional Value at Risk (CVaR), representing the expected loss beyond VaR.

Note: It only works for long positions, and the weights must add up to 1.

opt_sharpe(returns, rf)

Parameters

• returns (pd.DataFrame): DataFrame containing the daily returns of the stock prices.
• rf: One-year risk-free rate

Returns

It returns a dataFrame with the optimal weight for each stock.

min_variance(returns, rf)

Parameters

• returns (pd.DataFrame): DataFrame containing the daily returns of the stock prices.

Returns

It returns a dataFrame with the optimal weight for each stock.

mcc_portfolio(returns, alpha)

Parameters:

• returns (pd.DataFrame): DataFrame containing historical asset returns.
• alpha (float): Significance level for CVaR (example: 0.05 for 95% confidence level).

Returns:

It returns a dataFrame with the optimal weight for each stock.

Note: It is required to write alpha in decimal notation, also this portfolio strategie only works for long positions.

Usage Example

import numpy as np
import pandas as pd
import yfinance as yf
import vartools as vt
import matplotlib.pyplot as plt
from scipy.optimize import minimize

get_data

stocks = ["AAPL", "TSLA", "AMD", "LMT", "JPM"]
start_date = "2020-01-01"
end_date = "2023-01-01"
type = 'Adj Close' # 'Close', select the type of price you want to download

data = vt.get_data(stocks, start_date, end_date, type)

var_stocks

stocks = ["AAPL", "TSLA", "AMD", "LMT", "JPM"]
start_date = "2020-01-01"
end_date = "2023-01-01"
type = 'Adj Close' # 'Close', select the type of price you want to download

data = vt.get_data(stocks, start_date, end_date, type)
n_stocks =[2193, 1211, 3221, 761, 1231]
conf = 95
long = True

var_df = vt.var_stocks(data, n_stocks, conf, long, stocks)

var_forex

currencies = ['CHFMXN=X', 'MXN=X']
start_date = "2020-01-01"
end_date = "2024-12-02"
type = 'Adj Close'

data = vt.get_data(currencies, start_date, end_date, type)
positions = [7100000, 5300000] # How much you have in each currency. Must match the order in currencies.
conf = 99 # Nivel de confianza
long = True

var_forex_df = vt.var_forex(data, positions, conf, long, currencies)

rebalance_stocks

stocks = ["AAPL", "TSLA", "AMD", "LMT", "JPM"]
start_date = "2020-01-01"
end_date = "2023-01-01"
type = 'Adj Close' # 'Close', select the type of price you want to download

data = vt.get_data(stocks, start_date, end_date, type)

rt = data.pct_change().dropna()
stock_value = n_stocks * data.iloc[-1]
portfolio_value = stock_value.sum()
w_original = stock_value / portfolio_value
w_opt = [0.33, 0.15, 0.06, 0.46, 0.00]

rebalance_df = vt.rebalance_stocks(w_original, w_opt, data, stocks, portfolio_value)

var_weights

stocks = ["AAPL", "TSLA", "AMD", "LMT", "JPM"]
start_date = "2020-01-01"
end_date = "2023-01-01"
type = 'Adj Close' # 'Close', select the type of price you want to download

data = vt.get_data(stocks, start_date, end_date, type)

weights = [0.2457, 0.1301, 0.1820, 0.3064, 0.1358]
conf = 95
var_pct, cvar_pct = vt.var_weights(data, weights, conf)

opt_sharpe

stocks=['WMT','AAPL','GOOGL','PG','XOM','KO','CMG','F']
start_date='2020-01-01'
end_date='2024-11-24'
type='Adj Close'

data = vt.get_data(stocks, start_date, end_date, type)
returns = data.pct_change().dropna()
rf = 0.04413

optimal_weights_df = vt.opt_sharpe(returns, rf)

min_variance

stocks=['WMT','AAPL','GOOGL','PG','XOM','KO','CMG','F']
start_date='2020-01-01'
end_date='2024-11-24'
type='Adj Close'

data = vt.get_data(stocks, start_date, end_date, type)
returns = data.pct_change().dropna()

optimal_weights_df = vt.min_variance(returns)

mcc_portfolio

# bonds, commodities, equities and real estate
stocks = ['VBTLX', 'GSG', 'VTI', 'VNQ']
start_date = '2019-01-01'
end_date = '2024-01-01'
type = 'Adj Close'

data = vt.get_data(stocks, start_date, end_date, type)
returns = data.pct_change().dropna()
alpha = 0.05

mcc_weights = vt.mcc_portfolio(returns, alpha)

License

This project is licensed under the GPL-3.0 license.

Author

Luis Fernando Márquez Bañuelos