Financial Risk Measurement for Financial Risk Management
Torben Andersen (),
Tim Bollerslev (),
Peter Christoffersen and
Francis Diebold ()
PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania
Current practice largely follows restrictive approaches to market risk measurement, such as historical simulation or RiskMetrics. In contrast, we propose flexible methods that exploit recent developments in financial econometrics and are likely to produce more accurate risk assessments, treating both portfolio-level and asset-level analysis. Asset-level analysis is particularly challenging because the demands of real-world risk management in financial institutions - in particular, real-time risk tracking in very high-dimensional situations - impose strict limits on model complexity. Hence we stress powerful yet parsimonious models that are easily estimated. In addition, we emphasize the need for deeper understanding of the links between market risk and macroeconomic fundamentals, focusing primarily on links among equity return volatilities, real growth, and real growth volatilities. Throughout, we strive not only to deepen our scientific understanding of market risk, but also cross-fertilize the academic and practitioner communities, promoting improved market risk measurement technologies that draw on the best of both.
Keywords: Market risk; volatility; GARCH (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Pages: 126 pages
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed
Downloads: (external link)
Chapter: Financial Risk Measurement for Financial Risk Management (2013)
Working Paper: Financial Risk Measurement for Financial Risk Management (2012)
Working Paper: Financial Risk Measurement for Financial Risk Management (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:11-037
Access Statistics for this paper
More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator ().