What is analytical (approximating) methods?

Analytical (approximative) methods are techniques within risk management, for example in VAR (Value at Risk) calculations, which make use of formulas such as the Black-Scholes (option) model. In these formulas, sensitivity parameters such as delta, gamma and vega are integrated to quantify and manage risks. These methods offer a mathematical approach for estimating potential risks and returns, whereby complexity is reduced to manageable calculations.