scholarly journals Spread and Liquidity Issues: A markets comparison

2016 ◽  
Vol 62 (1) ◽  
pp. 3-11
Author(s):  
Sebastjan Strašek ◽  
Bor Bricelj
Keyword(s):  
At Risk ◽  
Risk Factor ◽  
Financial Crisis ◽  
Risk Aversion ◽  
Economic Crisis ◽  
Financial Crises ◽  
Value At Risk ◽  
Risk Framework ◽  
Standard Value ◽  
Spread Analysis

Abstract The financial crises are closely connected with spread changes and liquidity issues. After defining and addressing spread considerations, we research in this paper the topic of liquidity issues in times of economic crisis. We analyse the liquidity effects as recorded on spreads of securities from different markets. We stipulate that higher international risk aversion in times of financial crises coincides with widening security spreads. The paper then introduces liquidity as a risk factor into the standard value-at-risk framework, using GARCH methodology. The comparison of results of these models suggests that the size of the tested markets does not have a strong effect on the models. Thus, we find that spread analysis is an appropriate tool for analysing liquidity issues during a financial crisis.

Stress Testing in a Value at Risk Framework

CFA Digest ◽  
1999 ◽  
Vol 29 (2) ◽  
pp. 76-78
Author(s):  
Thomas J. Latta
Keyword(s):  
At Risk ◽  
Value At Risk ◽  
Stress Testing ◽  
A Value ◽  
Risk Framework

scholarly journals ESTIMATING VALUE-AT-RISK BASED ON NON-NORMAL DISTRIBUTIONS

2015 ◽  
Vol 3 ◽  
pp. 188-195 ◽  
Author(s):  
Mária Bohdalová ◽  
Michal Greguš
Keyword(s):  
At Risk ◽  
Risk Factor ◽  
Value At Risk ◽  
Likelihood Method ◽  
Normal Distributions ◽  
Confidence Levels ◽  
Portfolio Returns ◽  
Distribution Parameters ◽  
Financial Portfolios ◽  
Daily Changes

The article presents a comparative study of parametric linear value-at-risk (VaR) models used for estimating the risk of financial portfolios. We illustrate how to adjust VaR for auto-correlation in portfolio returns. The article presents static and dynamic methodology to compute VaR, based on the assumption that daily changes are independent and identically distributed (normal or non-normal) or auto-correlated in terms of the risk factor dynamics. We estimate the parametric linear VaR over a risk horizon of 1 day and 10 days at 99% and 95% confidence levels for the same data. We compare the parametric VaR and a VaR obtained using Monte Carlo simulations with historical simulations and use the maximum likelihood method to calibrate the distribution parameters of our risk factors. The study investigated whether the parametric linear VaR applies to contemporary risk factor analysis and pertained to selected foreign rates.

Value-at-risk performance in emerging and developed countries

2018 ◽  
Vol 14 (5) ◽  
pp. 591-612
Author(s):  
Luiz Eduardo Gaio ◽  
Tabajara Pimenta Júnior ◽  
Fabiano Guasti Lima ◽  
Ivan Carlin Passos ◽  
Nelson Oliveira Stefanelli
Keyword(s):  
At Risk ◽  
Financial Crises ◽  
Value At Risk ◽  
Risk Estimation ◽  
Developed Countries ◽  
Emerging Countries ◽  
Copula Functions ◽  
Predictive Capacity ◽  
Arch Models ◽  
Content Type

Purpose The purpose of this paper is to evaluate the predictive capacity of market risk estimation models in times of financial crises. Design/methodology/approach For this, value-at-risk (VaR) valuation models applied to the daily returns of portfolios composed of stock indexes of developed and emerging countries were tested. The Historical Simulation VaR model, multivariate ARCH models (BEKK, VECH and constant conditional correlation), artificial neural networks and copula functions were tested. The data sample refers to the periods of two international financial crises, the Asian Crisis of 1997, and the US Sub Prime Crisis of 2008. Findings The results pointed out that the multivariate ARCH models (VECH and BEKK) and Copula-Clayton had similar performance, with good adjustments in 100 percent of the tests. It was not possible to perceive significant differences between the adjustments for developed and emerging countries and of the crisis and normal periods, which was different to what was expected. Originality/value Previous studies focus on the estimation of VaR by a group of models. One of the contributions of this paper is to use several forms of estimation.

scholarly journals Bank Value at Risk (VAR) disclosures. A missed leading indicator to the Financial Crisis of 2008?

2020 ◽  
Vol 9 (3) ◽  
pp. 1
Author(s):  
Kiran Parthasarathy
Keyword(s):  
At Risk ◽  
Financial Crisis ◽  
Repeated Measures ◽  
Value At Risk ◽  
Annual Reports ◽  
Us Economy ◽  
Leading Indicator ◽  
Financial Crisis Of 2008 ◽  
Single Number ◽  
Risk Disclosures

The financial crisis of 2008 led to devastating consequences such as bankruptcies and recession in the US economy. Many big banks were at the forefront owing to their risk exposures and open positions. Prior research documents that bank financial statements did not provide adequate lead indicators on the looming crisis in reducing information asymmetry. However, there is no prior research focused on the sufficiency of risk disclosures around this time period. This paper seeks to address this gap using Bank Value at Risk (VAR), a single number publicly disclosed in the annual reports of banks. Bank VAR attempts to quantify the worst possible loss the bank expects to have on its trading portfolios under normal market conditions. Using hand-collected data from the annual reports of the top twelve US banks, this study documents that the change in VAR was steady and positive until the point of the crisis and then decreased in the years thereafter. A repeated-measures analysis of variance model is used to study whether two indicators of VAR (year-to-year change in VAR and log-transformed ratio of VAR to the total trading revenue) differ from pre-crisis to the post-crisis levels. Both VAR indicators reveal an increasing trend pre-crisis and are significantly higher pre-crisis compared to post-crisis. This opens the possibility that the trend of VAR might have information content as a potential leading indicator of the crisis. The finding sheds light on efficacy of risk analysis in ­­bank trading portfolios and could have implications for governance.

A Value-at-Risk framework for longevity trend risk ‐ Abstract of the London discussion

2013 ◽  
Vol 19 (1) ◽  
pp. 157-167
Author(s):  
Stephen Richards
Keyword(s):  
At Risk ◽  
Value At Risk ◽  
Publication Type ◽  
A Value ◽  
Risk Framework

This abstract relates to the following paper:RichardsS. J., CurrieI. D. and RitchieG. P.A Value-at-Risk framework for longevity trend risk.British Actuarial Journal, doi:10.1017/S1357321712000451

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