Jimenez-Martin, Juan-Angel and McAleer, Michael and Pérez Amaral, Teodosio (2009) The Ten Commandments for Managing Value-at-Risk Under the Basel II Accord. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 0912, 2009, ]
Official URL: http://eprints.ucm.es/8691/
Under the Basel II Accord, banks and other Authorized Deposit-taking Institutions (ADIs) are required to communicate their daily market risk estimates to the relevant national monetary authority at the beginning of each trading day, using one of a variety of Value-at-Risk (VaR) models to measure risk. The purpose of this paper is to provide a simple explanation and a set of prescriptions for managing VaR under the Basel II Accord. The commandments deal with understanding the Basel II colours,understanding the risk model before choosing, varying the choice of risk model,avoiding the green zone and being willing to violate, incurring large violations, stopping before the red zone, avoiding frequent violations, avoiding the estimation of large portfolios, aggregating portfolios into a single index, and interpreting commandments sensibly as guidelines.
|Item Type:||Working Paper or Technical Report|
JEL Classifications: G32, G11, G17.
|Uncontrolled Keywords:||Financial portfolios, Daily capital Charges, Frequency of violations, Magnitude of violations, Optimizing strategy, Risk forecasts, Value-at-risk, Green zone, Red zone.|
|Subjects:||Social sciences > Economics > Finance|
Social sciences > Economics > Accounting
|Series Name:||Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)|
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|Deposited On:||24 Mar 2009 12:08|
|Last Modified:||19 Jun 2015 11:46|
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