Optimal Portfolio Selection in a Value at Risk Framework

Drãgoi Cãtãlin (), Gabriela Piciu and Chiþiga Georgiana
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Drãgoi Cãtãlin: Financial and Monetary Research Center „Victor Slãvescu”, Bucharest, Romania
Chiþiga Georgiana: Financial and Monetary Research Center „Victor Slãvescu”, Bucharest, Romania

Ovidius University Annals, Economic Sciences Series, 2012, vol. XII, issue 2, 1080-1084

Abstract: The non-normality of asset return distributions has been a stylized fact in the empirical finance literature. Fat-tailedness, in particular, can have significant impact on the accuracy in computing value at risk (VaR), which became popular from the mid – 1990s as a primary measure of market risks arising from the trading activities of banks. The primary purpose of this study is to develop methodology VaR. At first VAR was only an educated estimate of the market risk, relative to a previously specified portfolio. VAR of a portfolio is a single figure, expressed in units of currency, summarizing within a specified holding period on a previously given confidence level.. All of these methods have different statistical assumptions and VAR results depend on the chosen method for a specified portfolio.

Keywords: methodology VaR; Monte Carlo simulation; Stress Testing; Back-Testing; Risk Metrics (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2012
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