Over the past 20 years, value-at-risk has been gradually gaining acceptance as a key market risk control tool for trading portfolios. VAR is used to set market risk limits at various levels of the portfolio hierarchy, as well as to determine risk-adjusted performance.
From a risk control perspective, VAR is often treated as a binary variable. According to this line of thinking, as long as a trading book is below its VAR limit, then no action is required. However, once traders approach or exceed
The week on Risk.net, July 14–20, 2017Receive this by email