APPLICATION OF VaR ANALYSIS TO ASSESS THE RISK IN BANKING INSTITUTIONS

Maria Vidolova ()
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Maria Vidolova: Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski

Yearbook of the Faculty of Economics and Business Administration, Sofia University, 2014, vol. 12, issue 1, 35-51

Abstract: The article discusses key theories related to modeling and risk management in financial institutions. The most common methodology for risk assessment method is used VaR (Value-at-Risk), which is an aggregate measure for comparing risk across portfolios and financial instruments. Discusses models of type ARCH, developed by R. Engle 1982., GARCH (p, q) – Bolerslav T. (1986). Special attention is paid to the Value-at-Risk (VaR), which reduces the total income distribution of the portfolio to a figure considered application of VaR method is associated with four main areas of banking: – In-house monitoring of market risks: aggregation can be done at the level of the banking book, the types of assets in issuers, counterparties, by traders (portfolio managers) and others. - - When an external monitor – the method allows to obtain an idea of the market risk of the portfolio without disclosing information about the composition of the portfolio. – The monitoring of the effectiveness of the hedge – the method allows an assessment of how hedging strategy is meeting the objectives (when compared with the performance of the portfolio hedging and no hedging). – The monitoring of transactions (transactions), by setting limits on transactions that do not exceed a certain value of the index VaR.

Keywords: risk models; risk analysis; VaR. (search for similar items in EconPapers)
Date: 2014
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