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Value at Risk and Mutual Funds

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Risk-Return Relationship and Portfolio Management

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Abstract

G-30, Basel Committee on Banking Supervision, Bank of International Settlements and most Central Banks across the globe have endorsed Value at Risk (VaR) as a standard for measuring risk . Though VaR is widely accepted as a true measure of risk for the banking industry, it is yet to find enough acceptance in the investment industry. VaR reporting on a periodic basis could help investors in better understanding of risks of loss to their investments. We have tried to review different methods of estimating VaR , and their applications. Many variants of VaR propagated by researchers seem to work in patches. Risk Metrics developed by J. P. Morgan, which uses exponentially weighted moving average (EWMA) method, has become a standard tool for VaR estimation. Till the time another more effective method is developed, VaR is likely to continue attracting a lot of interest.

Wide diversification is only required when investors do not understand what they are doing.

Warren Buffett

Sections of this chapter draw from the author’s previous publication (Srinivasan & Dhankar, 2015), co-authored by R Srinivasan, Professor (Finance& Accounts), Indus Business Academy, Greater Noida, India; re-used here with permission.

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Authors and Affiliations

  1. Faculty of Management Studies (FMS), University of Delhi, New Delhi, Delhi, India

    Raj S. Dhankar

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  1. Raj S. Dhankar
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Correspondence to Raj S. Dhankar .

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Dhankar, R.S. (2019). Value at Risk and Mutual Funds. In: Risk-Return Relationship and Portfolio Management. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-3950-5_18

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  • DOI: https://doi.org/10.1007/978-81-322-3950-5_18

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  • Print ISBN: 978-81-322-3948-2

  • Online ISBN: 978-81-322-3950-5

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