Value-at-risk (VAR)
US bank VAR-based charges surge in volatile first quarter
Average quarter-on-quarter increase of 23% for VAR-based capital across 11 large dealers
Crédit Agricole de-risking saps earnings
Corporate and investment banking RWAs fall 11%; net income falls €103 million
Bank of America and BNY Mellon suffer VAR breaches
Trading losses exceeded estimates on a single day at each dealer in the first quarter
Impact of D-vine structure on risk estimation
In this paper, a sensitivity analysis using pair–copula decomposition of multivariate dependency models is performed on estimates of value-at-risk (VaR) and conditional value-at-risk (CVaR).
ING market risk charge edges higher
Dutch bank adds €0.8 billion of market RWAs
Modeling very large losses
In this paper, the author presents a simple probabilistic model for aggregating very large losses into a loss collection.
Goldman Sachs’ VAR at three-year high
Increased client activity and market volatility increases firmwide risk
The Kelly criterion in portfolio optimization: a decoupled problem
This paper examines how the Kelly criterion can be implemented into a portfolio optimization model that combines risk and return into a single objective function using a risk parameter.
UBS shrugs off VAR exceptions
The Swiss bank has crunched down its market RWAs to Sfr12.3 billion
Rogue traders versus value-at-risk and expected shortfall
VAR and ES are ineffective to deter rogue trading
How not to control trading behaviour
Quants show popular risk measures fail to limit risk-seeking behaviour among traders
Curbing rogue behaviour
Regulators should try to combat rogue trading by measuring traders’ risk-taking differently, say quants
A central limit theorem formulation for empirical bootstrap value-at-risk
In this paper, the importance of the empirical bootstrap (EB) in assessing minimal operational risk capital is discussed, and an alternative way of estimating minimal operational risk capital using a central limit theorem (CLT) formulation is presented.
The validation of filtered historical value-at-risk models
In this paper, the authors examine the problem of validating and calibrating FHS VaR models, focussing in particular on the Hull and White (1998) approach with EWMA volatility estimates, given its extended use in the industry.
Quants needed: how finance can use power of quantum tech
New machines have big potential in AI, valuations and VAR, but tech giants like IBM need help from practitioners
Optimal equity protection of Solvency II regulated portfolios
In the context of equity investments, this paper examines the relationship between the cost of acquiring protection (in the form of put option) and the reduction of capital charges that it entails. The paper develops the idea that Solvency II regulations…
Valuing streams of risky cashflows with risk-value models
Based on risk-value models this paper introduces a multi-period approach to the valuation of streams of risky cash flows.
Initial margin with risky collateral
This paper explores the complication of calculating the IM amount requirement when collateral comprises risky assets in a parametric VaR framework. The authors show that the required IM amount can be calculated by solving a quadratic inequality.
Estimation risk for value-at-risk and expected shortfall
This paper provides a detailed analysis of the relationship between approximate VaR (ES) and exact VaR (ES) by finding a linear regression model in which the response variable is the approximate VaR (ES) and the explanatory variable is the exact VaR (ES)…
Ex-Fed trader Coffey on macro risks and VAR
Myopic models are creating feedback loops, warns founder of new macro firm Avoca
New historical bootstrap value-at-risk model
This paper presents a new value-at-risk (VaR) model for the estimation of market risk in banks and other financial institutions.
Optimising VAR and terminating Arnie-VAR
Albanese, Caenazzo and Syrkin show how full-revaluation VAR is more accurate and robust than sensitivity-based VAR measures
Unskewed incentives: making governance work
EIB model head explains a four-step process for putting risk at the centre of governance efforts
The bald truth about collateral haircut modelling
HSBC’s Wujiang Lou says parametric modelling of haircuts has many advantages over historical VAR