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Backtesting Value at Risk and Expected Shortfall

Backtesting Value at Risk and Expected Shortfall
Author: Simona Roccioletti
Publisher: Springer Gabler
Total Pages: 0
Release: 2015-12-11
Genre: Business & Economics
ISBN: 9783658119072
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In this book Simona Roccioletti reviews several valuable studies about risk measures and their properties; in particular she studies the new (and heavily discussed) property of "Elicitability" of a risk measure. More important, she investigates the issue related to the backtesting of Expected Shortfall. The main contribution of the work is the application of "Test 1" and "Test 2" developed by Acerbi and Szekely (2014) on different models and for five global market indexes.

Value at Risk (VaR) Backtesting

Value at Risk (VaR) Backtesting
Author: Gerald Z. Katsenga
Publisher:
Total Pages: 118
Release: 2013
Genre: Finance
ISBN:
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Value at Risk (VaR) Backtesting Techniques and P-Value Risk Decomposition Analysis

Value at Risk (VaR) Backtesting Techniques and P-Value Risk Decomposition Analysis
Author: Ali Shirazi
Publisher:
Total Pages: 15
Release: 2014
Genre:
ISBN:
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This paper presents a methodology to analyze the Value at Risk (VaR) backtesting probability values to detect the soundness of the VaR model, the integrity of the VaR input and output as well as providing information about the type of the risk that a subportfolio is exposed to in every trading day. The paper presets statistical methods to back test the number of VaR breaches when there is no or some autocorrelation in the P&L daily values. It illustrates a method to evaluate the model by backtesting all quintiles. It also presents a methodology to test the integrity of the P&L and consequently the p-values using the run test. Finally a model is presented to decompose the subportfolios' P&L risk into systematic and idiosyncratic risk using a Gaussian Copula model. The risk decomposition can be used to detect any unusual subportfolio exposures to specific risk or detect the unusual rise in the systematic risk across different subportfolios.

Implementing Value at Risk

Implementing Value at Risk
Author: Philip Best
Publisher: John Wiley & Sons
Total Pages: 224
Release: 2000-11-21
Genre: Business & Economics
ISBN: 0470865962
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Implementing Value at Risk Philip Best Value at Risk (VAR) is an estimate of the potential loss on a trading or investment portfolio. Its use has swept the banking world and is now accepted as an essential tool in any risk manager's briefcase. Perhaps the greatest strength of VAR is that it can cope with virtually all financial products, from simple securities through to complex exotic derivatives. This allows the risk taken, across diverse trading activities, to be compared. This said, VAR is no panacea. It is as critical to understand when the use of VAR is inappropriate as it is to understand the value VAR can add to a bank's understanding and control of its risks. This book aims to explain how VAR can be used as an integral part of a risk and business management framework, rather than as a stand-alone tool. The objectives of this book are to explain: What VAR is - and isn't! How to calculate VAR - the three main methods Why stress testing is needed to complement VAR How to make stress testing effective How to use VAR and stress testing to manage risk How to use VAR to improve a bank's performance VAR as a regulatory measure of risk and capital Risk management practitioners, general bank managers, consultants and students of finance and risk management will find this book, and the software package included, an invaluable addition to their library. Finance/Investment

Backtesting Value at Risk and Expected Shortfall

Backtesting Value at Risk and Expected Shortfall
Author: Simona Roccioletti
Publisher: Springer
Total Pages: 155
Release: 2015-12-04
Genre: Business & Economics
ISBN: 365811908X
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In this book Simona Roccioletti reviews several valuable studies about risk measures and their properties; in particular she studies the new (and heavily discussed) property of "Elicitability" of a risk measure. More important, she investigates the issue related to the backtesting of Expected Shortfall. The main contribution of the work is the application of "Test 1" and "Test 2" developed by Acerbi and Szekely (2014) on different models and for five global market indexes.

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

Measuring Traded Market Risk

Measuring Traded Market Risk
Author: Colleen Cassidy
Publisher:
Total Pages: 37
Release: 1997
Genre: Bank capital
ISBN:
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The proposed market-risk capital-adequacy framework, to be implemented at the end of 1997, requires Australian banks to hold capital against market risk. A fundamental component of this framework is the opportunity for banks to use their value-at-risk (VaR) models as the basis of the market-risk capital charge. Value-at-risk measures the potential loss on a portfolio for a specified level of confidence if adverse movements in market prices were to occur. This paper examines the VaR measure and some of the techniques available for assessing the performance of a VaR model. The first section of the paper uses a simple portfolio of two spot foreign exchange positions to illustrate three of the approaches used in the calculation of a VaR measure: variance-covariance, historical simulation and Monte-Carlo simulation. It is concluded that, although VaR is a very useful tool, it is not without its shortcomings and so should be supplemented with other risk-management techniques. The second section of the paper focuses on the use of backtesting the comparison of model-generated VaR numbers with actual profits and losses for assessing the accuracy of a VaR model. Several statistical tests are demonstrated by testing daily VaR and profit and loss data obtained from an Australian bank. The paper concludes that, although the tests are not sufficiently precise to form the basis of regulatory treatment of banks' VaR results, the tests do provide useful diagnostic information for evaluating model performance.

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.

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.