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One of the most important developments in portfolio risk management in the 1990s was the increased use of Value at Risk (VaR). VaR has enjoyed a spectacular rise, from being largely unknown at the beginning of the 1990s, to prominence among financial institutions and, more recently, also in the...
Persistent link: https://www.econbiz.de/10014901648
One of the most significant recent developments in the risk measurement and management area has been the emergence of value at risk (VaR). The VaR of a portfolio is the maximum loss that the portfolio will suffer over a defined time horizon, at a specified level of probability known as the VaR...
Persistent link: https://www.econbiz.de/10014901688
This article outlines a subjective approach to estimating value at risk (VaR) and its related confidence intervals based on priors of the profit/loss distribution and its parameters. In the tradition of Bayesian statistics, this pro‐duces probability density functions for VaR that allow for...
Persistent link: https://www.econbiz.de/10014901728
This article uses a Value‐at‐Risk approach to derive an estimator of the failure probability of a financial institution. The proposed approach can be applied to any profit/loss distribution, although Extreme Value (EV) theory also tells us that the most appropriate distributions are EV. The...
Persistent link: https://www.econbiz.de/10014901747
The pre‐commitment approach to bank capital regulation proposes that banks self‐select capital reserve requirements, facing penalties ex post for incurring losses in excess of reserves, hence providing incentives for high‐ risk banks to choose higher capital requirements. In order to...
Persistent link: https://www.econbiz.de/10014901772