Transcription of VALUE AT RISK (VAR)
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VALUE AT RISK (VAR)
1 VALUE AT RISK (VAR) What is the most I can lose on this investment? This is a question that almost every investor who has invested or is considering investing in a risky asset asks at some point in time. VALUE at Risk tries to provide an answer, at least within a reasonable bound. In fact, it is misleading to consider VALUE at Risk, or VaR as it is widely known, to be an alternative to risk adjusted VALUE and probabilistic approaches . After all, it borrows liberally from both. However, the wide use of VaR as a tool for risk assessment, especially in financial service firms, and the extensive literature that has developed around it, push us to dedicate this chapter to its examination. We begin the chapter with a general description of VaR and the view of risk that underlies its measurement, and examine the history of its development and applications.
Dec 17, 1996 · alternative to risk adjusted value and probabilistic approaches. After all, it borrows liberally from both. However, the wide use of VaR as a tool for risk assessment, especially in financial service firms, and the extensive literature that has developed around it, push us to dedicate this chapter to its examination.
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