Comparison of Historical and Parametric Value-at-Risk Methodologies

5 Pages Posted: 18 Nov 2009  

Péter Dobránszky

BNP Paribas, Risk - Investment & Markets; Catholic University of Leuven (KUL), Department of Mathematics

Date Written: September 24, 2009

Abstract

Should we apply historical or parametric Value-at-Risk (VaR) methodologies? In this note, we address some differences between the historical and parametric VaR methodologies. In the light of the recent crisis and turmoil on financial markets we look for advantages and disadvantages of the methodologies. This note is not targeted to give a broad analysis comparing all aspects of historical and parametric VaR methodologies, it intends to give only some thoughts instead that came into the minds when talking about different VaR methodologies.

Keywords: Value-at-Risk, historical VaR, parametric VaR, filtering procedures, normalization, Monte-Carlo simulations, asset price dynamics

JEL Classification: G12, G22, G24, C15, D81

Suggested Citation

Dobránszky, Péter, Comparison of Historical and Parametric Value-at-Risk Methodologies (September 24, 2009). Available at SSRN: https://ssrn.com/abstract=1508041 or http://dx.doi.org/10.2139/ssrn.1508041

Péter Dobránszky (Contact Author)

BNP Paribas, Risk - Investment & Markets ( email )

Montagne Du Parc 3
Brussels, 1000
Belgium

Catholic University of Leuven (KUL), Department of Mathematics ( email )

Celestijnenlaan 200 B
Leuven, 3001
Belgium

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