NDLI: Beyond VaR: parametric and simulation-based risk management tools

Content Provider	IEEE Xplore Digital Library
Author	Mausser, H. Rosen, D.
Copyright Year	1999
Description	Author affiliation: Algorithmics Inc., Toronto, Ont., Canada (Mausser, H.)
Abstract	Financial institutions worldwide have devoted much effort to developing enterprise-wide systems that integrate financial information across their organizations to measure their institution's risk. Probabilistic measures such as value-at-risk (VaR), are now widely accepted by both financial institutions and regulators for assigning risk capital and monitoring risk. Since development efforts have been driven largely by regulatory and internal requirements to report risk numbers, tools needed to understand and manage risk across the enterprise have generally lagged behind those designed to measure it. The paper presents an extended simulation based risk management toolkit developed on top of the analytical tools presented by R. Litterman (1996; 1997). Simulation based tools provide additional insights when the portfolio contains nonlinearities, when the market distributions are not normal or when there are multiple horizons. In particular, these tools should prove very useful not only for market risk, but also for credit risk, where the exposure and loss distributions are generally skewed and far from normal. We also demonstrate that simulation based tools can be used, sometimes even more efficiently, with other risk measures in addition to VaR. Indeed, they also uncover limitations of VaR as a coherent risk measure, as demonstrated by P. Artzner et al. (1998). We focus in particular on constructing useful visualizations of risk, as provided by triangular decompositions and trade risk profiles, and calculating relevant risk measures such as marginal VaR and VaR contributions.
Starting Page	159
Ending Page	162
File Size	281280
Page Count	4
File Format	PDF
ISBN	0780356632
DOI	10.1109/CIFER.1999.771114
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	1999-04-27
Publisher Place	USA
Access Restriction	Subscribed
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	Reactive power Risk management Portfolios Computational modeling Risk analysis Instruments Linear approximation Analytical models Regulators Monitoring
Content Type	Text
Resource Type	Article

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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