
Philips’ risk manager highlights VAR’s inadequacy
According to Kirkland, the reasons for Philips’ decision are manifold: history is not a good indicator of future events, too many estimates are required and results are more difficult to understand than simple sensitivity analysis. Philips adopted mark-to-market accounting at the start of 2000 and uses forwards and options to hedge its currency risk.
Another important limitation of VAR, highlighted by Kirkland, is the unrealistic assumption of normality. “How many times have you heard a guy on a trading floor say: ‘That was a three standard deviation move,’ only for him to say exactly the same thing again a few weeks later?” he added.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact [email protected] to find out more.
You are currently unable to copy this content. Please contact [email protected] to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
More on Market risk
Risk management
FCMs to let clients offset swaps and futures margin at Eurex
Banks target Q2 support for client cross-margining following lengthy lobby effort from hedge funds
Receive this by email