THE ROLE OF VALUE AT RISK IN THE MANAGEMENT OF ASSET AND LIABILITIES

Zapodeanu Daniela (), Cociuba Mihai () and Nicolae Petria
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Zapodeanu Daniela: University of Oradea, Faculty of Economic Sciences
Cociuba Mihai: University of Oradea, Faculty of Economic Sciences

Annals of Faculty of Economics, 2012, vol. 1, issue 2, 635-640

Abstract: ALM is the management of risk at enterprise level, the models used in ALM can be static or dynamic: single period-static models, multiple period static model, single period stochastic model, multi period stochastic model. While single period-static don't incorporate the dynamic of the economical changes the multiple period-static models are an extension of the single period-static model, the most common used are multi-period stochastic which model the evolution of financial series in time and the assets and liabilities using different types of probability distributions (Student, GED). Highly correlated with ALM is the Value at Risk which can be used as and function to be minimized in ALM models. In the Value at Risk methodology the estimation models are classified as: parametric, nonparametric, semi-parametric; we present the parametric models (GARCH models) used in Value at Risk and the connections that can be established between ALM models and Value at Risk. We present the Conditional Value-at-risk and offer and example on how to calculate CVaR .

Keywords: asset-liability models; Value-at-risk; Conditional Value-at-risk; GARCH (search for similar items in EconPapers)
JEL-codes: G17 G21 (search for similar items in EconPapers)
Date: 2012
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