Risk and probability measures
Although its drawbacks are well known, VAR has become institutionalised as the market risk measure of choice among trading firms and regulators. Now there is a growing feeling that a reappraisal is overdue, exemplified here by Phelim Boyle, Tak Kuen Siu and Hailiang Yang. Using the example of an unhedged option position in the classic two-level binomial tree framework, they evaluate VAR and alternative risk measures using objective and subjective probability measures
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