Add Value at Risk (VaR) and Expected Shortfall (ES) Calculator in R

[iampratik13]

This PR introduces a comprehensive and educational implementation of Value at Risk (VaR) and Expected Shortfall (ES) calculation methods in R.

Overview

The RiskMetrics R6 class implements multiple risk measurement techniques used in quantitative finance to assess potential portfolio losses:

• Historical Simulation (Non-parametric)
• Parametric (Variance-Covariance)
• Monte Carlo Simulation

It also computes Expected Shortfall (Conditional VaR) for each method and provides a detailed risk report including distribution statistics (mean, volatility, skewness, and kurtosis).

Features

• Modular and object-oriented design with R6
• Support for Historical, Parametric, and Monte Carlo methods
• Consistent interface for VaR and ES calculations
• Comprehensive statistical analysis of portfolio risk
• Example demonstration for reproducibility

Usage

Run demonstrate_risk_metrics() to execute the demonstration and print:

• VaR and ES results under multiple methods
• Portfolio statistics (mean, volatility, skewness, kurtosis)

Complexity

• Historical: O(n log n) due to sorting
• Parametric: O(1)
• Monte Carlo: O(n)

This implementation enhances the quantitative finance section by providing robust portfolio risk assessment tools commonly used in financial institutions and risk management frameworks.

[iampratik13]

@siriak

[Copilot]

Pull Request Overview

This PR introduces a comprehensive Value at Risk (VaR) and Expected Shortfall (ES) calculator for quantitative finance applications in R. The implementation provides multiple risk calculation methods commonly used in financial institutions for portfolio risk assessment.

Key Changes:

• Adds an R6 class RiskMetrics with modular design supporting three calculation methods (Historical, Parametric, Monte Carlo)
• Implements both VaR and ES calculations with consistent interfaces across all methods
• Includes comprehensive risk reporting with distribution statistics (mean, volatility, skewness, kurtosis)