HullRMFI2ndEdCh08金融风险管理.pptVIP

The Question Being Asked in VaR “What loss level is such that we are X% confident it will not be exceeded in N business days?” Risk Management and Financial Institutions 2e, Chapter 8, Copyright ? John C. Hull 2009 * VaR and Regulatory Capital Regulators base the capital they require banks to keep on VaR The market-risk capital is k times the 10-day 99% VaR where k is at least 3.0 Under Basel II, capital for credit risk and operational risk is based on a one-year 99.9% VaR Risk Management and Financial Institutions 2e, Chapter 8, Copyright ? John C. Hull 2009 * Advantages of VaR It captures an important aspect of risk in a single number It is easy to understand It asks the simple question: “How bad can things get?” Risk Management and Financial Institutions 2e, Chapter 8, Copyright ? John C. Hull 2009 * Example 8.1 (page 159) The gain from a portfolio during six month is normally distributed with mean $2 million and standard deviation $10 million The 1% point of the distribution of gains is 2?2.33×10 or ? $21.3 million The VaR for the portfolio with a six month time horizon and a 99% confidence level is $21.3 million. Risk Management and Financial Institutions 2e, Chapter 8, Copyright ? John C. Hull 2009 * Example 8.2 (page 159) All outcomes between a loss of $50 million and a gain of $50 million are equally likely for a one-year project The VaR for a one-year time horizon and a 99% confidence level is $49 million Risk Management and Financial Institutions 2e, Chapter 8, Copyright ? John C. Hull 2009 * Examples 8.3 and 8.4 (page 160) A one-year project has a 98% chance of leading to a gain of $2 million, a 1.5% chance of a loss of $4 million, and a 0.5% chance of a loss of $10 million The VaR with a 99% confidence level is $4 million What if the confidence level is 99.9%? What if it is 99.5%? Risk Management and Financial Institutions 2e, Chapter 8, Copyright ? John C. Hull 2009 * Cumulative Loss Distribution for Examples 8.3 and 8.4 (Figure 8.3, page 1