Taking exception
The reported number of value-at-risk exceptions at the world's largest financial institutions appears to be far lower than statistically expected. Are dealer VAR models faulty? And are regulatory standards vigorous enough? Christopher Jeffery
The brainchild of JP Morgan's risk division in 1994, value-at-risk models rapidly became the de facto measurement and monitoring approach for financial institutions looking to manage trading position risk. Prudential supervisors soon saw their advantages, and the Basel Committee on Banking Supervision formally incorporated the use of VAR models as the central element to its market risk capital adequacy rules through its Market Risk Amendment to the Basel capital Accord in January 1996. They are
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