Value at Risk Models

David L. Olson and Desheng Dash Wu
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David L. Olson: University of Nebraska
Desheng Dash Wu: Stockholm University

Chapter 6 in Enterprise Risk Management Models, 2017, pp 75-87 from Springer

Abstract: Abstract Value at risk (VaR) is one of the most widely used models in risk management. It is based on probability and statistics. VaR can be characterized as a maximum expected loss, given some time horizon and within a given confidence interval. Its utility is in providing a measure of risk that illustrates the risk inherent in a portfolio with multiple risk factors, such as portfolios held by large banks, which are diversified across many risk factors and product types. VaR is used to estimate the boundaries of risk for a portfolio over a given time period, for an assumed probability distribution of market performance. The purpose is to diagnose risk exposure.

Keywords: Cash Flow; Credit Spread; Historical Simulation; Basel Committee; Capital Charge (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/978-3-662-53785-5_6

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