Value-at-risk (VAR)
Hard times for VaR
The Basel Committee's ambitious plan to overhaul VaR models is coming in for fierce criticism. By John Ferry
Error of VAR by overlapping intervals
When overlapping intervals in time series are used, volatility and price changes' percentiles are underestimated. Consequently, value-at-risk is also underestimated. Heng Sun, Izzy Nelken, Guowen Han and Jiping Guo measure the size of this underestimation
A vicious circle
Regulators are looking at how best to ensure capital adequacy rules are not pro-cyclical. The Basel Committee has proposed changes to its market risk rules, but further, counter-cyclical changes have been suggested. What is being considered and what are…
The three flavours of VaR
Each of the three methods of calculating value-at-risk has its pros and cons. Brian Shydlo of Sirius Solutions examines them
Component VAR for a non-normal world
It has become standard to account for non-normality when estimating portfolio value-at-risk, but there are few methods available to calculate the risk contributions of each component in a non-normal portfolio. Brian Peterson and Kris Boudt present a…
Component VAR for a non-normal world
Market Risk
Valid Assumptions Required: backtesting
Given the large number of assumptions made in calculating a value-at-risk, how can we have confidence in the quality of the resulting calculation? Brett Humphreys looks at using backtesting to evaluate quality.
Valid Assumptions Required: Monte Carlo VaR
Brett Humphreys discusses the many decisions associated with the calculation of a Monte Carlo value-at-risk.
The year of living riskily
VAR Survey
Valid Assumptions Required: delta-normal VaR
A delta-normal value-at-risk is one of the basic tools of risk management. Brett Humphreys discusses the assumptions associated with this calculation.
Looking forward to back testing
With increasing challenges to measure value-at-risk and meet high regulatory requirements, the focus has turned to back testing as a way of assuring models' adequacy. Carsten S Wehn proposes a new regime of back testing, combining state-of-the-art…
Valid Assumptions Required: calculating correlations
Correlation measures are major drivers of value-at-risk. Brett Humphreys and Eric Raleigh review assumptions associated with calculating correlation.
Total control
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