Use of the Value at Risk Model by Stocks from the Prague Stock Exchange

Radim Gottwald

Littera Scripta, 2012, vol. 5, issue 2

Abstract: The paper focuses on the Value at Risk model, which is nowadays often used for risk analysis mostly in the banking and insurance industries. Following the characteristics of the model principle, the Value at Risk is interpreted in the economic sense. Two sub-methods are mentioned: Monte Carlo method and historical simulation method. Author presents a number of empirical studies focused on the application of these methods in the practice. The aim of the paper is to apply the Value at Risk model to selected stocks from the SPAD segment of the Prague Stock Exchange within the 2011 period using these two sub-methods. The confidence interval, hold period and other important parameters related to the sub-methods are selected. Based on historical stock prices, various statistical indicators are calculated. Non-diversified and diversified Value at Risk, calculated by the sub-methods are compared. The individual differences among relative, absolute and marginal Value at Risk are described in the paper. Author presents possibility of reducing the Value at Risk. Použití modelu Value at Risk u akcií z pražské Burzy cenných papírů

Keywords: Value at Risk model; risk measurement; Monte Carlo method; historical simulation method; model Value at Risk; měření rizika; metoda Monte Carlo; metoda historické simulace (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:rsg:littra:2012-007

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