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Market Risk Measurement and Management

In: Derivatives

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  • Jiří Witzany

    (University of Economics Prague)

Abstract

Qualified market risk management of asset and liability portfolios or trading activities is of key importance for banks and financial institutions. It is not only about quantitative measurement of the risks, but also about organizational and regulatory principles. Besides relatively simple market risk measures, we will define and explain various approaches to Value at Risk (VaR) and Conditional VaR estimation and backtesting. The two risk measures are used for day-to-day management as well as key regulatory capital concepts, or as tools of strategic risk management based on economic capital allocation. Market risk management, in particular in case of OTC derivatives, is also closely related to the counterparty credit risk management and measurement in terms of CVA (Credit Valuation Adjustment) that will be in detail discussed in the last section of this chapter.

Suggested Citation

  • Jiří Witzany, 2020. "Market Risk Measurement and Management," Springer Texts in Business and Economics, in: Derivatives, edition 1, chapter 5, pages 141-222, Springer.
    • Handle: RePEc:spr:sptchp:978-3-030-51751-9_5
    DOI: 10.1007/978-3-030-51751-9_5
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