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VaR

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Listed:
  • Neil D. Pearson
  • Charles Smithson

Abstract

Since “Value at Risk” (VaR) received its first wide introduction in the July 1993 Group of Thirty report, the number of users of—and uses for—VaR have increased dramatically. However, VaR itself has been evolving. In this article, we will first review some of the important refinements in VaR that have appeared—improved speed of computation, improved accuracy, and improved stress testing. We then look at the “next steps” (which we refer to as “Beyond VaR”), in which we review extensions to standard VaR, the emergence of “risk contribution” measures, and alternatives to standard VaR (including Extreme Value Theory [EVT] and Coherent Risk Measures).

Suggested Citation

  • Neil D. Pearson & Charles Smithson, 2002. "VaR," Review of Financial Economics, John Wiley & Sons, vol. 11(3), pages 175-189.
    • Handle: RePEc:wly:revfec:v:11:y:2002:i:3:p:175-189
    DOI: 10.1016/S1058-3300(02)00045-9
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    References listed on IDEAS

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    1. Jeremy Berkowitz, 1999. "Evaluating the forecasts of risk models," Finance and Economics Discussion Series 1999-11, Board of Governors of the Federal Reserve System (U.S.).
    2. Matthew Pritsker, 1997. "Evaluating Value at Risk Methodologies: Accuracy versus Computational Time," Journal of Financial Services Research, Springer;Western Finance Association, vol. 12(2), pages 201-242, October.
    3. Philippe Artzner & Freddy Delbaen & Jean‐Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228, July.
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