Challenging times for VAR

Few dispute that the Basel II framework has flaws, which have been starkly exposed by the financial crisis. The losses sustained by banks on structured credit exposures far outweighed anything their value-at-risk models suggested they could lose. By building requirements for VAR measures into Basel II, regulators were arguably responsible for institutionalising and giving an official stamp of approval to the use of such imperfect models. Other weaknesses have also become apparent: the lack of