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The Influence Of Confidence Level, Correlation And Volatility On Value At Risk. Six Case Studies

Author

Listed:
  • Izabela Pruchnicka-Grabias

    (Warsaw School of Economics, Republic of Poland)

Abstract

Studies show that hedge funds and other financial institutions often apply the standard deviation as a risk measure. Even if one looks at hedge fund internet pages with investment results data for investors, they usually present them with standard deviations and Sharpe indicators, neglecting the fact that their investment assets are not always normally distributed, as well as such important measures as for example kurtosis and skewness. The author estimates the correlation and volatility for selected investment assets and verifies assumptions of popular risk models concerning these parameters. The impact of the confidence level, correlation and volatility on Value at Risk is analyzed.

Suggested Citation

  • Izabela Pruchnicka-Grabias, 2014. "The Influence Of Confidence Level, Correlation And Volatility On Value At Risk. Six Case Studies," Interdisciplinary Management Research, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 10, pages 565-581.
    • Handle: RePEc:osi:journl:v:10:y:2014:p:565-581
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    hedge funds; financial institutions; standard deviation; investment assets;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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