Abstract
In this chapter we review the main market risk measurement tool used in banking, known as value-at-risk (VaR). The review looks at the three main methodologies used to calculate VaR, as well as some of the key assumptions used in the calculations, including those on the normal distribution of returns, volatility levels and correlations. We also discuss the use of the VaR methodology with respect to credit risk.
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Reference
JPMorgan, Introduction to Credietrics™, JPMorgan & Co., 1997.
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© 2005 Moorad Choudhry, Didier Joannas, Richard Pereira and Rod Pienaar
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Choudhry, M., Joannas, D., Pereira, R., Pienaar, R. (2005). Value-at-Risk and Credit VaR. In: Capital Market Instruments. Finance and Capital Markets Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230508989_22
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DOI: https://doi.org/10.1057/9780230508989_22
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-52426-6
Online ISBN: 978-0-230-50898-9
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)