Download This PaperAn Integrated Risk Management Method: VaR Approach
19 Pages Posted: 8 Jul 2015
Date Written: July 7, 2015
Abstract
This article presents a simple methodology for computing Value at Risk (VaR) for a portfolio of financial instruments that is sensitive to market risk, rating change, and default risk. An integrated model for market and credit risks is developed. The Jarrow, Lando and Turnbull model (the Markov chain model) is used to represent the dynamics of the credit rating. Procedures for calculating VaR are presented. Numerical illustration results are included.
Keywords: credit rating; default risk; integrated risk management; Markov chain; value at risk
JEL Classification: G10, D81
Suggested Citation: Suggested Citation
Yang, Hailiang, An Integrated Risk Management Method: VaR Approach (July 7, 2015). Multinational Finance Journal, Vol. 4, No. 3/4, p. 201-219, 2000, Available at SSRN: https://ssrn.com/abstract=2627654
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