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The Ten Commandments for Optimizing Value-at-Risk and Daily Capital Charges



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McAleer, Michael (2009) The Ten Commandments for Optimizing Value-at-Risk and Daily Capital Charges. [ Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 10, 2009, ] (No publicado)

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URL Oficial: http://eprints.ucm.es/8627/

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Credit risk is the most important type of risk in terms of monetary value. Another key risk measure is market risk, which is concerned with stocks and bonds, and related
financial derivatives, as well as exchange rates and interest rates. This paper is concerned with market risk management and monitoring under the Basel II Accord, and presents Ten Commandments for optimizing Value-at-Risk (VaR) and daily capital charges, based on choosing wisely from: (1) conditional, stochastic and realized volatility; (2) symmetry, asymmetry and leverage; (3) dynamic correlations and dynamic covariances; (4) single index and portfolio models; (5) parametric, semiparametric and nonparametric models; (6) estimation, simulation and calibration of parameters; (7) assumptions, regularity conditions and statistical properties; (8)accuracy in calculating moments and forecasts; (9) optimizing threshold violations and economic benefits; and (10) optimizing private and public benefits of risk management. For practical purposes, it is found that the Basel II Accord would seem to encourage excessive risk taking at the expense of providing accurate measures and forecasts of risk and VaR.

Tipo de documento:Documento de trabajo o Informe técnico
Información Adicional:

El autor pertenece a Departamento de Economía Cuántica de la Universidad Complutense de Madrid y al Econometric Institute. Erasmus University Rotterdam

Palabras clave:Daily capital charges, Excessive risk taking Market risk, Risk management, Value-at-risk, Violations.
Materias:Ciencias Sociales > Economía > Finanzas
JEL:G32, G11, G17, C53
Título de serie o colección:Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
Código ID:8627
Depositado:11 Mar 2009 10:57
Última Modificación:09 Jun 2017 08:48

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