A Gentle Introduction to Value at Risk

86 Pages Posted: 28 Mar 2017

See all articles by Laura Ballotta

Laura Ballotta

Sir John Cass Business School - City, University of London

Gianluca Fusai

Università del Piemonte Orientale Dipartimento di Studi per l'Economia e l'Impresa; Sir John Cass Business School - City, University of London

Date Written: March 28, 2017

Abstract

This paper is an introduction to the measurement of market risk in financial markets, with examples drawn mainly from commodity markets. In particular, we present the concept of VaR, its limits, the problems related to its estimation and backtesting. This is done at single asset and at portfolio level. Issues related to estimation error, measurement of portfolio risk contribution and how to cope with derivative positions are also considered. Other important issues like liquidity, operational and credit risk will not be dealt here. For a Gentle introduction to the measurement of counterparty credit risk see the companion paper by Ballotta, Fusai and Marena always available on the SSRN web site.

Keywords: Value at Risk, Parametric, Non Parametric, Delta-Gamma, Portfolio Modelling, Backtesting

JEL Classification: C15, C63, C65, G13

Suggested Citation

Ballotta, Laura and Fusai, Gianluca, A Gentle Introduction to Value at Risk (March 28, 2017). Available at SSRN: https://ssrn.com/abstract=2942138 or http://dx.doi.org/10.2139/ssrn.2942138

Laura Ballotta (Contact Author)

Sir John Cass Business School - City, University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

HOME PAGE: http://www.city.ac.uk/people/academics/laura-ballotta

Gianluca Fusai

Università del Piemonte Orientale Dipartimento di Studi per l'Economia e l'Impresa ( email )

Via Perrone, 18
Novara, 28100
Italy

HOME PAGE: http://https://upobook.uniupo.it/gianluca.fusai

Sir John Cass Business School - City, University of London ( email )

106 Bunhill Row
London, EC2Y 8HB
Great Britain

HOME PAGE: http:// www.cass.city.ac.uk/experts/G.Fusai

Register to save articles to
your library

Register

Paper statistics

Downloads
1,566
Abstract Views
3,367
rank
10,858
PlumX Metrics