We present a multi-period risk model to measure portfolio risk that integrates market risk, credit risk and, in a simplified way, liquidity risk. Thus, it overcomes the major limitation currently shared by many risk models that are unable to give a complete picture of all portfolio risks according to a single, coherent framework. The model is based on the Filtered Bootstrap approach; hence, it captures conditional heteroskedasticity, serial correlation and non-normality in the risk factors, that is, most of the features of observed financial time series. Being a simulation risk model, it copes in a natural way with derivatives as it allows the full valuation of the probability density function of the contracts. In addition, it is a suitable and flexible way to generate future scenarios on medium-term horizons, so this model is particularly appropriate for asset management companies. Copyright Banca Monte dei Paschi di Siena SpA, 2004
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Article provided by Banca Monte dei Paschi di Siena SpA in its journal Economic Notes.
Volume (Year): 33 (2004) Issue (Month): 3 (November) Pages: 375-398 Download reference. The following formats are available: HTML
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