Stochastics for the worst case: distributions and risk measures for minimal returns
AbstractDistributions for returns are used to compute the capital charge for portfolios in investment banks. The mainstream definition of returns is based on closing prices and neglects the important effects of intraday trading activity on the losses . In this paper we introduce ''minimal returns'', a definition of returns that accounts for intraday trading and gives a worst-case approach on losses. We suggest an appropriate distribution for minimal returns that can be used to compute Value at Risk and coherent risk measures, as suggested by Artzner et al. (1997).
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Bibliographic InfoPaper provided by EconWPA in its series Risk and Insurance with number 0305001.
Date of creation: 28 May 2003
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Risk measures ; Value at Risk ; Stock Returns ; Binomial Tree ; Brownian Motion ; Capital Charge ; Risk Management ; Worst Case Analysis ; Binomial Tree Extremes;
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- Philippe Artzner & Freddy Delbaen & Jean-Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228.
- Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
- Carlos Arriaga & Luis Miranda, 2009. "Risk and Efficiency in Credit Concession: A Case Study in Portugal," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 7(3), pages 307-326.
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