Risk Measurement: An Introduction to Value at Risk

Thomas J. Linsmeier and Neil Pearson ()
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Thomas J. Linsmeier: University of Illinois at Urbana-Champaign

Finance from University Library of Munich, Germany

Abstract: This paper is a self-contained introduction to the concept and methodology of "value at risk," which is a new tool for measuring an entity's exposure to market risk. We explain the concept of value at risk, and then describe in detail the three methods for computing it: historical simulation; the variance-covariance method; and Monte Carlo or stochastic simulation. We then discuss the advantages and disadvantages of the three methods for computing value at risk. Finally, we briefly describe some alternative measures of market risk.

Keywords: subliminal extant Smith economagic gmm value at risk; market risk; simulation (search for similar items in EconPapers)
JEL-codes: G (search for similar items in EconPapers)
Date: 1996-09-26
Note: Type of Document - MS Word 7; prepared on PC; to print on HP;
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:9609004

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