Implementing Value at Risk

Implementing Value at Risk Philip Best Value at Risk (VAR) is an estimate of the potential loss on a trading or investment portfolio. Its use has swept the banking world and is now accepted as an essential tool in any risk manager's briefcase. Perhaps the greatest strength of VAR is that it can cope with virtually all financial products, from simple securities through to complex exotic derivatives. This allows the risk taken, across diverse trading activities, to be compared. This said, VAR is no panacea. It is as critical to understand when the use of VAR is inappropriate as it is to understand the value VAR can add to a bank's understanding and control of its risks. This book aims to explain how VAR can be used as an integral part of a risk and business management framework, rather than as a stand-alone tool. The objectives of this book are to explain: What VAR is - and isn't! How to calculate VAR - the three main methods Why stress testing is needed to complement VAR How to make stress testing effective How to use VAR and stress testing to manage risk How to use VAR to improve a bank's performance VAR as a regulatory measure of risk and capital Risk management practitioners, general bank managers, consultants and students of finance and risk management will find this book, and the software package included, an invaluable addition to their library. Finance/Investment "Value at Risk" (VAR) is a modeling method used to determine how much money an organization is putting at risk through its trading activities. Here, Philip Best, an expert on the subject, offers a comprehensive and detailed discussion on the many aspects of VAR. Best covers the evolution of Value at Risk, using VAR as a risk measurement technique, using VAR to control risk, historical simulation, and implementing VAR. Most importantly, the author shows how Value at Risk should be calculated and used most effectively. ch0.pdf......Page 1 ch1.pdf......Page 12 ch2.pdf......Page 25 ch3.pdf......Page 43 ch4.pdf......Page 68 ch5.pdf......Page 114 ch6.pdf......Page 139 ch7.pdf......Page 152 ch8.pdf......Page 160 ch9.pdf......Page 185 ch10.pdf......Page 208 ch11.pdf......Page 210 ch12.pdf......Page 212 Explains how Value at Risk (VAR) can be used as an integral part of a risk and business management framework, rather than as a stand-alone tool