Component VAR for a non-normal world

Market Risk

Value-at-risk is the most widely used downside risk measure in finance. Garman (1997) introduced the concept of component VAR and showed that for portfolio VAR calculated under the assumption of normality, it is possible to decompose the portfolio risk into the risks introduced by each component of the portfolio. The finance literature on portfolio downside risk has recently realised that it is desirable that estimators of VAR can be decomposed in a financially meaningful way into the risk

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The new rules of market risk management

Amid 2020’s Covid-19-related market turmoil – with volatility and value-at-risk (VAR) measures soaring – some of the world’s largest investment banks took advantage of the extraordinary conditions to notch up record trading revenues. In a recent Risk.net…

ETF strategies to manage market volatility

Money managers and institutional investors are re-evaluating investment strategies in the face of rapidly shifting market conditions. Consequently, selective genres of exchange-traded funds (ETFs) are seeing robust growth in assets. Hong Kong Exchanges…

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