Abstract

http://ssrn.com/abstract=619484
 
 

References (30)



 
 

Citations (2)



 


 



Analysing Perceived Downside Risk: The Component Value-at-Risk Framework


Winfried G. Hallerbach


Robeco Asset Management, Quantitative Strategies

Albert J. Menkveld


VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA); Duisenberg School of Finance


European Financial Management, Vol. 10, No. 4, pp. 567-591, December 2004

Abstract:     
Multinational companies face increasing risks arising from external risk factors, e.g. exchange rates, interest rates and commodity prices, which they have learned to hedge using derivatives. However, despite increasing disclosure requirements, a firm's net risk profile may not be transparent to shareholders. We develop the 'Component Value-at-Risk (VaR)' framework for companies to identify the multi-dimensional downside risk profile as perceived by shareholders. This framework allows for decomposing downside risk into components that are attributable to each of the underlying risk factors. The firm can compare this perceived VaR, including its composition and dynamics, to an internal VaR based on net exposures as it is known to the company. Any differences may lead to surprises at times of earnings announcements and thus constitute a litigation threat to the firm. It may reduce this information asymmetry through targeted communication efforts.

Number of Pages in PDF File: 25

Accepted Paper Series





Date posted: November 30, 2004  

Suggested Citation

Hallerbach, Winfried G. and Menkveld, Albert J., Analysing Perceived Downside Risk: The Component Value-at-Risk Framework. European Financial Management, Vol. 10, No. 4, pp. 567-591, December 2004. Available at SSRN: http://ssrn.com/abstract=619484

Contact Information

Winfried George Hallerbach (Contact Author)
Robeco Asset Management, Quantitative Strategies ( email )
Coolsingel 120
Rotterdam, 3011 AG
Netherlands
+31102242316 (Phone)
HOME PAGE: http://www.robeco.com/quant
Albert J. Menkveld
VU University Amsterdam ( email )
De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)
Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )
Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands
Duisenberg School of Finance ( email )
Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands
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