Using stock data that covers the period from 6th April 2001 to 17th June 2009, including data for the recent crisis period, we perform Value at Risk risk model validation by backtesting the performance of VaR models in predicting future losses of a portfolio of stocks, futures and options. The...

The financial crisis at the end of last decade has called for a comprehensive liquidity risk management framework. The challenge not only lies in finding appropriate liquidity risk measures but more importantly how to apply these measures to implement a risk based liquidity management. A core...

Liquidity risk is a risk of not being able to generate enough funds to meet the payment obligation. There has been a growing amount of literature on liquidity assessment and planning following the recent financial crisis. So far, not enough attention is given to the liquidity execution. At the...

The capturing of tail events, especially those that incur severe loss at rare chance, is one of the important objectives for modern risk analysis. However past behavior in financial data is not necessarily a correct reflection of the possible scenarios in the future. The economic turmoils in the...

In this paper we describe methods of decomposing risk into subcomponents such as contributing instruments, subportfolios or underlying risk factors e.g., equity, foreign exchange, economy-wide systematic and interest rate risk factors. The Euler allocation principle for allocation of instrument...

Portfolio risk measures such as Value at Risk is traditionally measured using a buy and hold assumption on the portfolio. In particular the 10-day market risk capital is commonly measured as the 1-day Value at Risk scaled by the square root of 10. While this scaling is convenient to obtain n-day...