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VaR-x: Fat Tails in Financial Risk Management

Ronald Huisman (), K.G. Koedijik and Rachel Pownall ()

Working Papers from Southern California - School of Business Administration

Abstract: To ensure a competent regulatory framework with respect to Value-at-Risk for Establishing Bank's capital adequacy requirements, as promoted by the Basle Committee, then the parametrical approach to estimate VaR needs to incorporte fat tails, apparent in the return distributions of financial assets. This paper provides a simple method to obtain accurate parametric VaR-x mesures, by including a specific measure for the tail fatness of an asset's return distribution.

Keywords: RISK; MANAGEMENT; FINANCIAL MARKET (search for similar items in EconPapers)
JEL-codes: D80 G10 G14 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1998
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