Risk Measurement: An Introduction to Value at Risk
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Abstract
This paper is a self-contained introduction to the concept and methodology of "value at risk," which is a new tool for measuring an entity's exposure to market risk. We explain the concept of value at risk, and then describe in detail the three methods for computing it: historical simulation; the variance-covariance method; and Monte Carlo or stochastic simulation. We then discuss the advantages and disadvantages of the three methods for computing value at risk. Finally, we briefly describe some alternative measures of market risk.Download Info
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Paper provided by EconWPA in its series Finance with number 9609004.
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Date of creation: 26 Sep 1996
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Handle: RePEc:wpa:wuwpfi:9609004
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Related research
Keywords: subliminal extant Smith economagic gmm value at risk; market risk; simulation;Find related papers by JEL classification:
G - Financial Economics
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Citations
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- Basak, Suleyman & Shapiro, Alexander, 2001.
"Value-at-Risk-Based Risk Management: Optimal Policies and Asset Prices,"
Review of Financial Studies,
Oxford University Press for Society for Financial Studies, vol. 14(2), pages 371-405.
- Suleyman Basak & Alexander Shapiro, 1999. "Value-at-Risk Based Risk Management: Optimal Policies and Asset Prices," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-032, New York University, Leonard N. Stern School of Business-.
- Suleyman Basak & Alex Shapiro, . "Value-at-Risk Based Risk Management: Optimal Policies and Asset Prices," Rodney L. White Center for Financial Research Working Papers 06-99, Wharton School Rodney L. White Center for Financial Research.
- Suleyman Basak & Alex Shapiro, . "Value-at-Risk Based Risk Management: Optimal Policies and Asset Prices," Rodney L. White Center for Financial Research Working Papers 6-99, Wharton School Rodney L. White Center for Financial Research.
- Xiongwei Ju & Neil D. Pearson, 1998. "Using Value-at-Risk to Control Risk Taking: How Wrong Can you Be?," Finance 9810002, EconWPA.
- Mark R. Manfredo. & Raymond M. Leuthold, 1999. "Market Risk Measurement and the Cattle Feeding Margin: An Application of Value-at-Risk," Finance 9908002, EconWPA.
- Mark R. Manfredo & Raymond M. Leuthold, 1998. "Agricultural Applications of Value-at-Risk Analysis: A Perspective," Finance 9805002, EconWPA.
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