From Variance to Value at Risk: A Unified Perspective on Standardized Risk Measures
AbstractRisk is a concept which matters to many issues in economics and finance. The range of risk measures proposed goes from classics like variance to modern approaches like Value-at-Risk (VaR). In this paper, after a short characterization of managers' intuitive notion of risk, an overview on those risk measures is given which try to measure risk in a standardized way independent of individually varying perception. Then, it is shown that all these measures including Value-at-Risk, basically, are special cases of a certain well-known family of risk measures. From this point of view, the most critical features of each measure, particularly of VaR, become immediately evident.
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Bibliographic InfoPaper provided by Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland in its series FSES Working Papers with number 306.
Length: 9 pages
Date of creation: Aug 1998
Date of revision:
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