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Optimal Risk Management Before, During and After the 2008-09 Financial Crisis



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McAleer, Michael y Jimenez-Martin, Juan-Angel y Pérez Amaral, Teodosio (2009) Optimal Risk Management Before, During and After the 2008-09 Financial Crisis. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 20, 2009, ] (No publicado)

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URL Oficial: http://eprints.ucm.es/9478/

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In this paper we advance the idea that optimal risk management under the Basel II Accord will typically require the use of a combination of different models of risk. This idea is illustrated by analyzing the best empirical models of risk for five stock indexes before, during,and after the 2008-09 financial crisis. The data used are the Dow Jones Industrial Average, Financial Times Stock Exchange 100, Nikkei, Hang Seng and Standard and Poor’s 500 Composite Index. The primary goal of the exercise is to identify the best models for risk management in each period according to the minimization of average daily capital requirements under the Basel II Accord. It is found that the best risk models can and do vary before, during and after the 2008-09 financial crisis. Moreover, it is found that an aggressive risk management strategy, namely the supremum strategy that combines different models of risk, can result in significant gains in average daily capital requirements, relative to the strategy of using single models, while staying within the limits of the Basel II Accord.

Tipo de documento:Documento de trabajo o Informe técnico
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JEL Classifications: G32, G11, G17, C53, C22

Palabras clave:Optimal risk management, Average daily capital equirements, Alternative risk strategies, Value-at-risk forecasts, Combining risk models.
Materias:Ciencias Sociales > Economía > Finanzas
Ciencias Sociales > Economía > Crisis económicas
Título de serie o colección:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Código ID:9478
Depositado:22 Sep 2009 10:10
Última Modificación:19 Jun 2015 11:27

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