Abstract

http://ssrn.com/abstract=1758548
 
 

References (63)



 
 

Citations (17)



 


 



Value-at-Risk Model Risk


Carol Alexander


University of Sussex - School of Business, Management and Economics

José María Sarabia


University of Cantabria - Department of Economics

January 9, 2011


Abstract:     
Large banks assess their regulatory capital for market risk using complex, firm-wide Value-at-Risk (VaR) models. In their 'bottom-up' approach to VaR there are many sources of model risk. A recent amendment to banking regulations requires additional market risk capital to cover all these model risks but, as yet, there is no accepted framework for computing such an add-on. We introduce a top-down approach to quantifying VaR model risk in a rigorous statistical framework and derive a corresponding adjustment to regulatory capital that is relatively straightforward to implement.

Number of Pages in PDF File: 24

Keywords: Basel II, Maximum entropy, Model risk, Quantile, Risk capital, Value-at-Risk, VaR

JEL Classification: C1, C19, C51, G17, G28

working papers series





Download This Paper

Date posted: February 9, 2011  

Suggested Citation

Alexander, Carol and Sarabia, José María, Value-at-Risk Model Risk (January 9, 2011). Available at SSRN: http://ssrn.com/abstract=1758548 or http://dx.doi.org/10.2139/ssrn.1758548

Contact Information

Carol Alexander (Contact Author)
University of Sussex - School of Business, Management and Economics ( email )
Falmer, Brighton BN1 9SL
United Kingdom
HOME PAGE: http://www.sussex.ac.uk/bam
José María Sarabia
University of Cantabria - Department of Economics ( email )
Av. Los Castros s/n
39005 - Santander (Cantabria), Cantabria 39005
Spain
Feedback to SSRN


Paper statistics
Abstract Views: 2,265
Downloads: 581
Download Rank: 25,857
References:  63
Citations:  17

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.344 seconds