Interpreting Value at Risk (VaR) forecasts

Allan W. Gregory () and Jonathan J. Reeves

Economic Systems, 2008, vol. 32, issue 2, pages 167-176

Abstract: Value at Risk (VaR) forecasts have been increasingly accepted globally by both risk managers and regulators as a tool to identify and control exposure to financial market risk. However, modern portfolios are characterized by a constantly changing composition of security holdings that reflect portfolio managers' strategies, expected prices, and net cash flows into the portfolio. As a result of these factors, portfolio returns are time-varying mixtures of distributions which are unlikely to be well approximated by conventional methods.

Date: 2008

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