A Structure for General and Specific Market Risk
The paper presents a consistent approach to the modeling of general and specific market risk as defined in regulatory documents. It compares the statistically based beta-factor model with a class of benckmark models that use a broadly based index as major building block for modeling. The investigation of log-return of stock prices that are expressed in units of the market index reveals that these are likely to be Student t distributed. A corresponding discrete time benchmark model is then used to calculate Value-at-Risk for equity portfolios.
|Date of creation:||01 Feb 2003|
|Publication status:||Published as: Platen, E. and Stahl, G., 2004, "A Structure for General and Specific Market Risk", Computational Statistics, 18(3), 355-373.|
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