Delta Gamma VaR
Delta Gamma VaR is a way to measure the value at risk for non-linear portfolios using the analytical approach. The method is essentially a second order Taylor series approximation to calculate the value at risk. This approach will work as long as the value of the position can be reasonably approximated by a quadratic function. This will work over a moderate range of price variations, but will not be appropriate for large price moves in crisis situations. You can read a more detailed treatment of how to implement Delta Gamma VaR here.
You can also download a spreadsheet that shows how to calculate delta gamma var for options by clicking on the button below. Please note you will have to sin in before you can download the spreadsheet. Hwoever you join very easily using your Google, Facebook or Twitter id, or alternatively create an account with us here for free.