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.
Dec 17, 1996 · though their efforts were directed towards a different end – devising optimal portfolios for equity investors. In particular, the focus on market risks and the effects of the co-movements in these risks are central to how VaR is computed. The impetus for the use of VaR measures, though, came from the crises that beset
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