Time-inconsistency of VaR and time-consistent alternatives
Patrick Cheridito and
Mitja Stadje ()
Finance Research Letters, 2009, vol. 6, issue 1, 40-46
We show that VaR (Value-at-Risk) is not time-consistent and discuss examples where this can lead to dynamically inconsistent behavior. Then we propose two time-consistent alternatives to VaR. The first one is a composition of one-period VaR's. It is time-consistent but not coherent. The second one is a composition of average VaR's. It is a time-consistent coherent risk measure.
Keywords: Value-at-Risk; Time-consistency; Composed; Value-at-Risk; Composed; average; Value-at-Risk (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:6:y:2009:i:1:p:40-46
Access Statistics for this article
Finance Research Letters is currently edited by R. GenÃ§ay
More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().