Measuring the Risk in value at Risk电子版

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1、Risk:MeasuringtheRiskinvalueatRiskPhilippeJorionTherecentderivativesdisastershavefocusedtheattentionofthefinanceindustryontheneedtocontrolfinancialrisksbetter.Thissearchhasledtouniformmeasureofriskcalledvalueatrisk(VAR),whichistheexpectedworstlossovergivenhorizonatgivenconfidencelevel.VARnumbers

2、,however,arethemselvesaffectedbysamplingvariation,or”estimationrisk”-thus,theriskinvalueatriskitself.Nevertheless,giventheselimitations,VARisanindispensabletooltocontrolfinancialrisks.ThisarticlelaysoutthestatisticalmethodologyforanalyzingestimationerrorinVARandshowshowtoimprovetheaccuracyofVARe

3、stimates.Theneedtoimprovecontroloffinancialriskshasledtoauniformmeasureofriskcalledvalueatrisk(VAR),whichtheprivatesectorisincreasinglyadoptingasafirstlineofdefenseagainstfinancialrisks.RegulatorsandcentralbanksalsoprovidedtheimpetusbehindVAR.TheBasleCommitteeonBankingSupervisionannouncedinApril

4、1995thatcapitaladequacyrequirementsforcommercialbanksaretobebasedonVAR.InDecember1995,theSecuritiesandExchangeCommissionissuedaproposalthatrequirespubliclytradedU.S.corporationstodiscloseinformationaboutderivativesactivity,withaVARmeasureasoneofthreepossiblemethodsformakingsuchdisclosures.Thus,t

5、heunmistakabletrendistowardmore-transparentfinancialriskreportingbasedonVARmeasures.VARsummarizestheworstexpectedlossoveratargethorizonwithinagivenconfidenceinterval.VARsummarizesinasinglenumbertheglobalexposuretomarketrisksandtheprobabilityofadversemovesinfinancialvariables.Itmeasuresriskusingt

6、hesameunitsasthebottomline-dollars.BankersTrust,forexample,revealedinits1994annualreportthatitsdailyVARwasanaverageof$35millionatthe99percentconfidenceleveloveroneday;thisnumbercanbereadilycomparedwithitsannualprofitof$615millionortotalequityof$4.7billion.Onthebasisofsuchdata,shareholdersandmana

7、gerscandecidewhethertheyfeelcomfortablewithalevelofrisk.Iftheanswerisno,theprocessthatledtothecomputationofVARcanbeusedtodecidewheretotrimrisk.Inadditiontofinancialreporting,VARcanbeusedforavarietyofotherpurposes,suchassetti