Value At Risk (VAR)
¡Supera tus tareas y exámenes ahora con Quizwiz!
3 elements
1) specified level of loss in value 2) fixed time period over which risk is assessed 3) a confidence interval
confidence interval
how the probability of loss is portrayed; must define probability distributions of individual risks, the correlation across these risks and the effect of such risks on value
IB VaR
market risk focused - interest rate changes, equity market volatility and economic growth (though this is typical, we could define risk more narrowly or broadly to apply VaR to various situations)
VaR
measures the potential loss of a risky asset or portfolio over a defined period of time for a given confidence interval; sometimes more narrowly defined as the possible loss in value from "normal market risk"
