Full Valuation method is the process of measurement of risk of a portfolio by fully re-pricing it under a set of scenarios over a time period. It can be used to cover a large range of values of the portfolio returns in order to provide more accurate results. It generally provides more accurate results compared to delta normal approach but is a complicated process.
Advantages over delta normal:
It accounts for non-linearities of derivatives whereas delta normal assumes a linear approximation.
It accounts for extreme fluctuations.
Two popular methods under full revaluation approach have been explained in the subsequent slides.
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