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Implied Correlation from VaR

John Cotter and Francois Longin
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Francois Longin: ESSEC Graduate Business School, France

No 200618, Working Papers from Geary Institute, University College Dublin

Abstract: Value at risk (VaR) is a risk measure that has been widely implemented by financial institutions. This paper measures the correlation among asset price changes implied from VaR calculation. Empirical results using US and UK equity indexes show that implied correlation is not constant but tends to be higher for events in the left tails (crashes) than in the right tails (booms).

Keywords: Implied Correlation; Value at Risk (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2011
New Economics Papers: this item is included in nep-ban and nep-rmg
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Citations: View citations in EconPapers (3)

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http://www.ucd.ie/geary/static/publications/workingpapers/gearywp200618.pdf First version, 2006 (application/pdf)

Related works:
Working Paper: Implied correlation from VaR (2011) Downloads
Working Paper: Implied correlation from VaR (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ucd:wpaper:200618

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