A quantile-based Time at Risk: A new approach for assessing risk in financial markets

Meysam Bolgorian and Reza Raei

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 22, 5673-5677

Abstract: In this paper, we provide a new measure for evaluation of risk in financial markets. This measure is based on the return interval of critical events in financial markets or other investment situations. Our main goal was to devise a model like Value at Risk (VaR). As VaR, for a given financial asset, probability level and time horizon, gives a critical value such that the likelihood of loss on the asset over the time horizon exceeds this value is equal to the given probability level, our concept of Time at Risk (TaR), using a probability distribution function of return intervals, provides a critical time such that the probability that the return interval of a critical event exceeds this time equals the given probability level. As an empirical application, we applied our model to data from the Tehran Stock Exchange Price Index (TEPIX) as a financial asset (market portfolio) and reported the results.

Keywords: Return interval; Risk (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:22:p:5673-5677

DOI: 10.1016/j.physa.2013.07.020

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