Value at Risk & Transaction Exposure: An Inter-Temporal Lexicographic Permutation of a Six-Currency Portfolio

8 Pages Posted: 26 Sep 2011

See all articles by Kashi Khazeh

Kashi Khazeh

Salisbury University

Fatollah Salimian

Salisbury University - Franklin P. Perdue School of Business

Robert C. Winder

Christopher Newport University - Department of Economics

Date Written: September 25, 2011

Abstract

Combinations of a six-Currency portfolio are studied for a two-year period to access the reliability of “value at risk” approach to measuring the transaction exposure. The values at risk for each currency and for every additional currency portfolio are estimated for each year. The outcomes for the different permutations for each year are compared, not only in alphabetical and reverse alphabetical order, but for the best case scenario as well, to weigh up the reliability of the value at risk methodology. Comparing the results of the two years, it is established that variability in both the standard deviations of the individual exchange rates and their covariance can result in notably diverse estimates of value at risk, even over daily time periods.

Keywords: Six Currency, Value at Risk

JEL Classification: D92, F31

Suggested Citation

Khazeh, Kashi and Salimian, Fatollah and Winder, Robert C., Value at Risk & Transaction Exposure: An Inter-Temporal Lexicographic Permutation of a Six-Currency Portfolio (September 25, 2011). Available at SSRN: https://ssrn.com/abstract=1933264 or http://dx.doi.org/10.2139/ssrn.1933264

Kashi Khazeh (Contact Author)

Salisbury University ( email )

1101 Camden Ave
Salisbury, MD 21801
United States

Fatollah Salimian

Salisbury University - Franklin P. Perdue School of Business ( email )

1101 Camden Avenue
Salisbury, MD 21801
United States

Robert C. Winder

Christopher Newport University - Department of Economics ( email )

Luter Hall 227
Newport News, VA 23606
United States
757-594-7420 (Phone)
757-594-7808 (Fax)

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