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Application of Granularity Adjustment Approximation Method to Incremental Value-at-Risk in Concentrated Portfolios

Author

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  • Yu Takata

    (Sumitomo Mitsui Trust Research Institute)

Abstract

Most financial institutions use credit value-at-risk (VaR) produced by Monte-Carlo simulation or analytical approximation. While Monte-Carlo simulation needs large computational resources, and many approximation formulas have been proposed. We discuss the granularity adjustment approximation, and apply it to calculating incremental VaR. Through numerical experiments we show that we can obtain better approximation results by the granularity adjustment formula concerning incremental VaR.

Suggested Citation

  • Yu Takata, 2018. "Application of Granularity Adjustment Approximation Method to Incremental Value-at-Risk in Concentrated Portfolios," Economics Bulletin, AccessEcon, vol. 38(4), pages 2320-2330.
    • Handle: RePEc:ebl:ecbull:eb-18-00874
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    credit value-at-risk (VaR); granularity adjustment approximation; monte-Carlo simulation; Concentrated Portfolios;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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