On the Necessity of Five Risk Measures

Dominique Guegan () and Wayne Tarrant ()
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Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Wayne Tarrant: Wingate University - UBC - University of British Columbia [Canada]

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: The banking systems that deal with risk management depend on underlying risk measures. Following the recommendation of the Basel II accord, most banks have developed internal models to determine their capital requirement. The Value at Risk measure plays an important role in computing this capital. In this paper we analyze in detail the errors produced by use of this measure. We then discuss other measures, pointing out their strengths and shortcomings. We give detailed examples, showing the need for five risk measures in order to compute a capital in relation to the risk to which the bank is exposed. In the end, we suggest using five different risk measures for computing capital requirements.

Keywords: Risk measure; Value at Risk; Bank capital; Basel II Accord; Mesures de risque; VaR; capital bancaire; accord de Bâle II (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-ban, nep-fmk and nep-rmg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00721339v1
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Citations: View citations in EconPapers (2)

Published in Annals of Finance, 2012, 8 (4), pp.533-552. ⟨10.1007/s10436-012-0205-2⟩

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Related works:
Journal Article: On the necessity of five risk measures (2012)
Working Paper: On the necessity of five risk measures (2010)
Working Paper: On the necessity of five risk measures (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00721339

DOI: 10.1007/s10436-012-0205-2

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