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Value At Risk - Corporate Risk Measurement

Author

Listed:
  • Anis Cecilia-Nicoleta

    () (Universitatea de Vest, Facultatea de Economie si de Administrare a Afacerilor)

  • Roth Anne-Marie

    () (Universitatea de Vest, Facultatea de Economie si de Administrare a Afacerilor)

  • Apolzan (Angyal) Carmen-Maria

    () (Universitatea de Vest, Facultatea de Economie si de Administrare a Afacerilor)

Abstract

The notion of "risk" is used in a number of sciences. The Faculty of Law studies the risk depending on its legality. The Accident Theory applies this term to describe the damage and the disasters. One can find studies on the risks in the works of psychology, philosophy, medicine and within each of these areas the study of the risk is based on the given science subject and, of course, on their methods and approaches. Such a variety of risk study is explained by the diversity of this phenomenon. Under the market economy conditions, the risk is an essential component of any economic agent management policy, of the approach developed by this one, a strategy that depends almost entirely on individual ability and capacity to anticipate his evolution and to exploit his opportunities, assuming a so-called \"risk of business failure.\" There are several ways to measure the risks in projects, one of the most used methods to measure this being the Value at Risk(VaR). Value at Risk (VaR) was made famous by JP Morgan in the mid 1990s, by introducing the RiskMetrics approach, and hence, by far, has been sanctioned by several Governing Bodies throughout the world bank. In short, it measures the value of risk capital stocks in a given period at a certain probability of loss. This measurement can be modified for risk applications through, for example, the potential loss values affirmation in a certain amount of time during the economic life of the project- clearly, a project with a lower VaR is better. It should be noted that it is not always possible or advisable for a company to limit itself to the remote analysis of each risk because the risks and their effects are interdependent and constitute a system .In addition, there are risks which, in combination with other risks, tend to produce effects which they would not have caused by themselves and risks that tend to offset and even cancel each other out.

Suggested Citation

  • Anis Cecilia-Nicoleta & Roth Anne-Marie & Apolzan (Angyal) Carmen-Maria, 2011. "Value At Risk - Corporate Risk Measurement," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 387-392, December.
  • Handle: RePEc:ora:journl:v:1:y:2011:i:2:p:387-392
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    File URL: http://anale.steconomiceuoradea.ro/volume/2011/n2/053.pdf
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    References listed on IDEAS

    as
    1. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    2. DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March.
    3. de Jong, A., 2001. "The Disciplining Role of Leverage in Dutch Firms," Discussion Paper 2001-48, Tilburg University, Center for Economic Research.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    risk; value at risk; confidence intervals; variance; Monte Carlo simulation;

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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