Limits on far VAR

A growing number of hedge funds are adopting value-at-risk as a risk measurement tool, amid growing demand for greater risk disclosure. But VAR may not be the best risk measure for buy-side firms, argues Barry Schachter

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The strengths and weaknesses of value-at-risk have been examined in detail, but mostly in the context of sell-side uses. However, hedge funds, both large and small, are increasingly adopting VAR for risk measurement. It may be less useful - in some respects - when applied in this new context.

It is generally agreed that VAR is not a comprehensive measure of risk, so the increasing adoption of VAR models by the buy side is interesting. This is perhaps partly a response to the clamour

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