Value-at-risk (VAR)
Risk Europe: Operational risk key to enterprise risk management
Op risk should play a dominant role in the development of ERM, says Thomson Reuters’ Philippe Carrel
Sponsored statement: Strategies for success
A practical and holistic approach to stress testing in financial services
Cutting Edge: Measuring the risk of Financial Transmission Rights
In this month’s article, Ning Zhang proposes a semi-parametric approach to calculate the risk of FTRs/TCCs portfolios whose risk is hard to capture by using standard VaR methods. The major specialties of FTRs/TCCs – such as non-normality and seasonality …
Capturing fat tails
Financial institutions are more aware of the risks posed by high-impact events since the crisis, but the question is how to encapsulate these in models. Zari Rachev, Boryana Racheva-Iotova and Stoyan Stoyanov discuss three approaches for capturing fat…
Valid Assumptions Required: an analysis of VaR for energy markets
In this 10-part series, Brett Humphreys takes a fresh look at the widely used risk measure value-at-risk (VaR), urging risk managers to be more aware of the many assumptions that go into the calculation to produce the VaR number.
What does VAR mean in 2010?
Value-at-risk figures fell across the industry in 2009, while exceptions dropped significantly from levels in 2007 and 2008. But discussion over what VAR figures actually show and how the numbers are interpreted by senior management continues. By…
A sting in the tail
After recent financial turmoil, market participants are thinking much more rigorously about ways to protect themselves against the possibility of rare but extreme events. However, effectively hedging tail risk is not straightforward. By Mark Pengelly
Summing up VAR
There are a number of approaches to building the IT systems architecture required for historical simulation value-at-risk implementations. What are the pros and cons associated with these architectures? And why does the risk-aggregator approach overcome…
Pass the microphone: Humphreys to Strickland
In this new column, an industry professional interviews a market expert of their choice. Next month the interviewee becomes the interviewer and chooses who to interview. The series is kicked off by Brett Humphreys putting his questions to Lacima Group’s…
Consultants’ outlook: 2010 Expert views
Energy Risk convened representatives from Ernst & Young, MRE Consulting, Sapient, The Structure Group and SunGard Consulting Services to discuss a number of topics on the outlook for 2010, including new regulation, future market developments, credit and…
Modest means
Credit loss models typically calibrate default separate from loss given default. Here, Jon Frye calibrates simultaneously, using credit loss data. This produces a surprising test result: the credit loss models do not significantly outperform a…
Active risk control
Richard Bibb explores the pitfalls of value-at-risk statistics and explains how they can be interpreted and incorporated into a meaningful risk management strategy
Being stressed is good for you
Increased regulatory focus means stress testing can no longer play a minor role in banks’ strategic thinking and capital considerations. Many institutions require cultural and procedural change to make this happen, but are they capable of bringing it…
A rotationally invariant technique for rare event simulation
Because of their low probability, including extreme events in Monte Carlo calculations of the value-at-risk of a credit-risky portfolio requires many simulations. Here, Susanne Klöppel, Ranja Reda and Walter Schachermayer demonstrate a geometrically…
Cutting edge: Visualising value-at-risk
Risk transparency is an important yet elusive goal of any risk management process. One challenge is to understand the diversification effects of the portfolio elements. Wentao Zhao and Kevin Kindall introduce a graphical technique based on value-at-risk…