Value at risk: new approaches to risk management
Managing risk has always been an integral part of banking. In the past two years an approach to risk management called "Value at Risk" has been accepted by both practitioners and regulators as the "right" way to measure risk, becoming a de facto industry standard. Yet, the danger is that overreliance on value at risk can give risk managers a false sense of security or lull them into complacency. Value at risk is only one of many tools of managing risk, and it is based on a number of unrealistic assumptions. There is no generally accepted way to calculate it, and various methods can yield widely different results.> This article described several common methods for calculating value at risk and highlights important assumptions and methodological issues. The author discusses the strengths and weaknesses of value at risk, pointing out that its use has created a common language for discussions about risk and prompted more dialogue about risk issues. She cautions, however, that successful risk management is a much broader task, which depends crucially on appropriate incentives and internal controls.
Volume (Year): (1996)
Issue (Month): Sep ()
|Contact details of provider:|| Postal: |
Web page: http://www.bos.frb.org/Email:
More information through EDIRC
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:1996:i:sep:p:3-13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.