Value-at-risk (VAR)

Stress tests and risk capital

For many financial institutions, "stress tests" are an important input into processes that set risk capital allocations. In the current regulatory environment, two distinct model-based approaches for setting regulatory capital requirements include stress…

A coherent framework for stress testing

In recent months and years, practitioners and regulators have embraced the idea of supplementing value-at-risk estimates with "stress testing". Risk managers are beginning to place an emphasis and expend resources on developing more and better stress…

VaR-x: Fat tails in financial risk management

To ensure a competent regulatory framework with respect to value-at-risk (VaR) for establishing a bank's capital adequacy requirements, as promoted by the Basel Committee on Banking Supervision, the parametric approach for estimating VaR needs to…

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