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Value-at-Risk - Estimated with the Parametric Method

Value-at-Risk - Estimated with the Parametric Method
Author: Philip Deichmann
Publisher:
Total Pages:
Release: 2008
Genre:
ISBN:
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This paper estimates the risk in a portfolio consisting of 19 Danish Stocks from the OMXC20 index by means of the parametric method. Under an assumption of normal distributed returns a MA(20)-, MA(40)- and MA(60) model as well as an EWMA(0,94)-, EWMA(0,97)- and EWMA(0,99)-model is used to estimate the variance of the portfolio and calculate the Value-at-Risk. Over a 4 year-period, consisting of two back-testing periods of one year and two estimation periods of one and a half year each, back-testing is done. Using 5 different back-tests it is concluded that the EWMA(0,99)-model gives the optimal daily Value-at-Risk for the portfolio over the whole period.

Measuring Market Risk with Value at Risk

Measuring Market Risk with Value at Risk
Author: Pietro Penza
Publisher: John Wiley & Sons
Total Pages: 324
Release: 2001
Genre: Business & Economics
ISBN: 9780471393139
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"This book, Measuring Market Risk with Value at Risk by Vipul Bansal and Pietro Penza, has three advantages over earlier works on the subject. First, it takes a decidedly global approach-an essential ingredient for any comprehensive work on market risk. Second, it ties the scientifically grounded, yet intuitively appealing, VaR measure to earlier, more idiosyncratic measures of market risk that are used in specific market environs (e.g., duration in fixed income). Finally, it encompasses all of the accepted approaches to calculating a VaR measure and presents them in a clearly explained fashion with supporting illustrations and completely worked-out examples." -from the Foreword by John F. Marshall, PhD, Principal, Marshall, Tucker & Associates, LLC "Measuring Market Risk with Value at Risk offers a much-needed intellectual bridge, a translation from the esoteric realm of mathematical finance to the domain of financial managers who seek guidance in applying developments from this important field of research as well as that of MBA-level graduate instruction. I believe the authors have done a commendable job of providing a carefully crafted, highly readable, and most useful work, and intend to recommend it to all those involved in business risk management applications." -Anthony F. Herbst, PhD, Professor of Finance and C.R. and D.S. Carter Chair, The University of Texas, El Paso and Founding editor of The Journal of Financial Engineering (1991-1998) "Finally there's a book that strikes a balance between rigor and application in the area of risk management in the banking industry. This innovative book is a MUST for both novices and professionals alike." -Robert P. Yuyuenyongwatana, PhD, Associate Professor of Finance, Cameron University "Measuring Market Risk with Value at Risk is one of the most complete discussions of this emerging topic in finance that I have seen. The authors develop a logical and rigorous framework for using VaR models, providing both historical references and analytical applications." -Kevin Wynne, PhD, Associate Professor of Finance, Lubin School of Business, Pace University

An Introduction to Value-at-Risk

An Introduction to Value-at-Risk
Author: Moorad Choudhry
Publisher: John Wiley & Sons
Total Pages: 194
Release: 2007-01-11
Genre: Business & Economics
ISBN: 0470033770
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The value-at-risk measurement methodology is a widely-used tool in financial market risk management. The fourth edition of Professor Moorad Choudhry’s benchmark reference text An Introduction to Value-at-Risk offers an accessible and reader-friendly look at the concept of VaR and its different estimation methods, and is aimed specifically at newcomers to the market or those unfamiliar with modern risk management practices. The author capitalises on his experience in the financial markets to present this concise yet in-depth coverage of VaR, set in the context of risk management as a whole. Topics covered include: Defining value-at-risk Variance-covariance methodology Monte Carlo simulation Portfolio VaR Credit risk and credit VaR Topics are illustrated with Bloomberg screens, worked examples, exercises and case studies. Related issues such as statistics, volatility and correlation are also introduced as necessary background for students and practitioners. This is essential reading for all those who require an introduction to financial market risk management and value-at-risk.

Sample Size, Skewness and Leverage Effects in Value at Risk and Expected Shortfall Estimation

Sample Size, Skewness and Leverage Effects in Value at Risk and Expected Shortfall Estimation
Author: Laura García Jorcano
Publisher: Ed. Universidad de Cantabria
Total Pages: 162
Release: 2020-02-24
Genre: Business & Economics
ISBN: 8481029122
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The thesis analyzes the effect that the sample size, the asymmetry in the distribution of returns and the leverage in their volatility have on the estimation and forecasting of market risk in financial assets. The goal is to compare the performance of a variety of models for the estimation and forecasting of Value at Risk (VaR) and Expected Shortfall (ES) for a set of assets of different nature: market indexes, individual stocks, bonds, exchange rates, and commodities. The three chapters of the thesis address issues of greatest interest for the measurement of risk in financial institutions and, therefore, for the supervision of risks in the financial system. They deal with technical issues related to the implementation of the Basel Committee's guidelines on some aspects of which very little is known in the academic world and in the specialized financial sector. In the first chapter, a numerical correction is proposed on the values usually estimatedwhen there is little statistical information, either because it is a financial asset (bond, investment fund...) recently created or issued, or because the nature or the structure of the asset or portfolio have recently changed. The second chapter analyzes the relevance of different aspects of risk modeling. The third and last chapter provides a characterization of the preferable methodology to comply with Basel requirements related to the backtesting of the Expected Shortfall.

Improving Value-at-Risk Estimates by Combining Kernel Estimation with Historical Simulation

Improving Value-at-Risk Estimates by Combining Kernel Estimation with Historical Simulation
Author: Barry Schachter
Publisher:
Total Pages:
Release: 1998
Genre:
ISBN:
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In this paper we develop a means to improve the performance of one of the more popular methods for Value-at-Risk measurement, the historical simulation approach. The procedure we employ is the following: First, the density of the return on a portfolio is estimated using a non- parametric method, called a Gaussian kernel. Second, we derive an expression for the density of any order statistic of the return distribution. Finally, because the density is not analytic, we employ Gauss-Legendre integration to obtain the moments of the density of the order statistic, the mean being our Value-at-Risk estimate, and the standard deviation providing us with the unique ability to construct a confidence interval around the estimate. We apply this method to trading portfolios provided by a financial institution.

Analyzing Value at Risk and Expected Shortfall Methods

Analyzing Value at Risk and Expected Shortfall Methods
Author: Xinxin Huang
Publisher:
Total Pages: 0
Release: 2014
Genre:
ISBN:
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Value at Risk (VaR) and Expected Shortfall (ES) are methods often used to measure market risk. Inaccurate and unreliable Value at Risk and Expected Shortfall models can lead to underestimation of the market risk that a firm or financial institution is exposed to, and therefore may jeopardize the well-being or survival of the firm or financial institution during adverse markets. The objective of this study is therefore to examine various Value at Risk and Expected Shortfall models, including fatter tail models, in order to analyze the accuracy and reliability of these models. Thirteen VaR and ES models under three main approaches (Parametric, Non-Parametric and Semi-Parametric) are examined in this study. The results of this study show that the proposed model (ARMA(1,1)-GJR-GARCH(1,1)-SGED) gives the most balanced Value at Risk results. The semi-parametric model (Extreme Value Theory, EVT) is the most accurate Value at Risk model in this study for S&P 500.

Exotic Derivatives and Risk

Exotic Derivatives and Risk
Author: Mondher Bellalah
Publisher: World Scientific
Total Pages: 617
Release: 2009
Genre: Business & Economics
ISBN: 9812797475
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This book discusses in detail the workings of financial markets and over-the-counter (OTC) markets, focusing specifically on standard and complex derivatives. The subjects covered range from the fundamental products in OTC markets, standard and exotic options, the concepts of value at risk, credit derivatives and risk management, to the applications of option pricing theory to real assets.To further elucidate these complex concepts and formulas, this book also explains in each chapter how theory and practice go hand-in-hand. This volume, a culmination of the author's 12 years of professional experience in the field of finance, derivative analysis and risk management, is a valuable guide for postgraduate students, academics and practitioners in the field of finance.

Market Risk Analysis, Value at Risk Models

Market Risk Analysis, Value at Risk Models
Author: Carol Alexander
Publisher: John Wiley & Sons
Total Pages: 503
Release: 2009-02-09
Genre: Business & Economics
ISBN: 0470997885
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Written by leading market risk academic, Professor Carol Alexander, Value-at-Risk Models forms part four of the Market Risk Analysis four volume set. Building on the three previous volumes this book provides by far the most comprehensive, rigorous and detailed treatment of market VaR models. It rests on the basic knowledge of financial mathematics and statistics gained from Volume I, of factor models, principal component analysis, statistical models of volatility and correlation and copulas from Volume II and, from Volume III, knowledge of pricing and hedging financial instruments and of mapping portfolios of similar instruments to risk factors. A unifying characteristic of the series is the pedagogical approach to practical examples that are relevant to market risk analysis in practice. All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the the accompanying CD-ROM . Empirical examples and case studies specific to this volume include: Parametric linear value at risk (VaR)models: normal, Student t and normal mixture and their expected tail loss (ETL); New formulae for VaR based on autocorrelated returns; Historical simulation VaR models: how to scale historical VaR and volatility adjusted historical VaR; Monte Carlo simulation VaR models based on multivariate normal and Student t distributions, and based on copulas; Examples and case studies of numerous applications to interest rate sensitive, equity, commodity and international portfolios; Decomposition of systematic VaR of large portfolios into standard alone and marginal VaR components; Backtesting and the assessment of risk model risk; Hypothetical factor push and historical stress tests, and stress testing based on VaR and ETL.

Value at Risk, 3rd Ed.

Value at Risk, 3rd Ed.
Author: Philippe Jorion
Publisher: McGraw Hill Professional
Total Pages: 624
Release: 2006-11-09
Genre: Business & Economics
ISBN: 0071736921
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Since its original publication, Value at Risk has become the industry standard in risk management. Now in its Third Edition, this international bestseller addresses the fundamental changes in the field that have occurred across the globe in recent years. Philippe Jorion provides the most current information needed to understand and implement VAR-as well as manage newer dimensions of financial risk. Featured updates include: An increased emphasis on operational risk Using VAR for integrated risk management and to measure economic capital Applications of VAR to risk budgeting in investment management Discussion of new risk-management techniques, including extreme value theory, principal components, and copulas Extensive coverage of the recently finalized Basel II capital adequacy rules for commercial banks, integrated throughout the book A major new feature of the Third Edition is the addition of short questions and exercises at the end of each chapter, making it even easier to check progress. Detailed answers are posted on the companion web site www.pjorion.com/var/. The web site contains other materials, including additional questions that course instructors can assign to their students. Jorion leaves no stone unturned, addressing the building blocks of VAR from computing and backtesting models to forecasting risk and correlations. He outlines the use of VAR to measure and control risk for trading, for investment management, and for enterprise-wide risk management. He also points out key pitfalls to watch out for in risk-management systems. The value-at-risk approach continues to improve worldwide standards for managing numerous types of risk. Now more than ever, professionals can depend on Value at Risk for comprehensive, authoritative counsel on VAR, its application, and its results-and to keep ahead of the curve.

Trading and Pricing Financial Derivatives

Trading and Pricing Financial Derivatives
Author: Patrick Boyle
Publisher: Walter de Gruyter GmbH & Co KG
Total Pages: 298
Release: 2018-12-17
Genre: Business & Economics
ISBN: 1547401214
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Trading and Pricing Financial Derivatives is an introduction to the world of futures, options, and swaps. Investors who are interested in deepening their knowledge of derivatives of all kinds will find this book to be an invaluable resource. The book is also useful in a very applied course on derivative trading. The authors delve into the history of options pricing; simple strategies of options trading; binomial tree valuation; Black-Scholes option valuation; option sensitivities; risk management and interest rate swaps in this immensely informative yet easy to comprehend work. Using their vast working experience in the financial markets at international investment banks and hedge funds since the late 1990s and teaching derivatives and investment courses at the Master's level, Patrick Boyle and Jesse McDougall put forth their knowledge and expertise in clearly explained concepts. This book does not presuppose advanced mathematical knowledge, though it is presented for completeness for those that may benefit from it, and is designed for a general audience, suitable for beginners through to those with intermediate knowledge of the subject.