beyond VaR-from measuring risk to managing risk.pdfVIP

Beyond VaR: From Measuring Risk to Managing Risk Helmut Mausser and Dan Rosen This paper examines tools for managing, as opposed to simply monitoring, a portfolio’s Value-at-Risk (VaR). These tools include the calculation of VaR contribution, marginal VaR and trade risk profiles. We first review the parametric, or delta-normal, versions of these tools and then extend them to the simulation- based, or non-parametric, case. We analyze two sample portfolios: one, consisting of foreign exchange contracts, is well-suited for parametric analysis while the other, which contains European options, is best addressed with simulation-based methods. The limitations of the simulation-based approach, due to the potential effects of sampling error, are also discussed.)LQDQFLDOLQVWLWXWLRQVZRUOGZLGHKDYHGHYRWHG PXFKHIIRUWWRGHYHORSLQJHQWHUSULVHZLGH V\VWHPVWKDWLQWHJUDWHILQDQFLDOLQIRUPDWLRQ DFURVVWKHLURUJDQL]DWLRQVWRPHDVXUHWKHLU LQVWLWXWLRQ·VULVN3UREDELOLVWLFPHDVXUHVVXFKDV 9DOXHDW5LVN9D5DUHQRZZLGHO\DFFHSWHGE\ ERWKILQDQFLDOLQVWLWXWLRQVDQGUHJXODWRUVIRU DVVLJQLQJULVNFDSLWDODQGPRQLWRULQJULVN6LQFH GHYHORSPHQWHIIRUWVKDYHEHHQGULYHQODUJHO\E\ UHJXODWRU\DQGLQWHUQDOUHTXLUHPHQWVWRUHSRUW ULVNQXPEHUVWRROVQHHGHGWRXQGHUVWDQGDQG PDQDJHULVNDFURVVWKHHQWHUSULVHKDYHJHQHUDOO\ ODJJHGEHKLQGWKRVHGHVLJQHGWRPHDVXUHLW 0HDVXULQJULVNLVDSDVVLYHDFWLYLW\VLPSO\ NQRZLQJRQH·V9D5GRHVQRWSURYLGHPXFK JXLGDQFHIRUPDQDJLQJULVN,QFRQWUDVWULVN PDQDJHPHQWLVDG\QDPLFHQGHDYRUDQGLW UHTXLUHVWRROVWKDWKHOSLGHQWLI\DQGUHGXFHWKH VRXUFHVRIULVN7KHVHWRROVVKRXOGOHDGWRDQ HIIHFWLYHXWLOL]DWLRQRIWKHZHDOWKRIILQDQFLDO SURGXFWVDYDLODEOHLQWKHPDUNHWVWRREWDLQWKH GHVLUHGULVNSURILOHV 7RDFKLHYHWKLVDFRPSUHKHQVLYHULVNPDQDJHU·V WRRONLWPXVWSURYLGHWKHDELOLW\WR ? UHSUHVHQWFRPSOH[SRUWIROLRVVLPSO\ ? GHFRPSRVHULVNE\DVVHWDQGRUULVNIDFWRU ? XQGHUVWDQGKRZQHZWUDGHVDIIHFWWKH SRUWIR