Analysis of the Exposure to Losses of Brazilian ETFs According to the Value at Risk (VAR) and Expected Shortfall (ES) Market Risk Assessment Techniques

For investors, Exchange-Traded Funds (ETFs) are securities structured as portfolios that replicate financial market indexes, but with the facility of being traded as stocks. The aim of the study was to analyze the risk exposure of Brazilian ETFs, compared to the Ibovespa index and the corresponding BMFBovespa indexes. For the present analysis the methodology of Value-at-Risk (VaR) at 5% was used, with historical simulation, coupled with the Expected Shortfall (ES) methodology, also at 5%. Next, the Unplanned Divergence (DnP) was used as a tracking error mechanism . The Monte Carlo simulation for replication of the verified values was also used, considering the previous profitability measures. The results presented the frequency distributions for the losses, and those lower than the VaR, which characterizes the expectation of loss measured by the ES. All ETFs presented losses and exposure to risk greater than those observed for the Ibovespa benchmark and its respective benchmark indexes.