Quantile-Var is the Wrong Measure to Quantify Market Risk for Regulatory Purposes
10 Pages Posted: 4 Mar 2002
Date Written: July 27, 2001
Starting from the objective of banking supervision - to minimize the overall costs of banking to the general public - we show that the current standard of quantifying market risk is flawed. It is perfectly aligned with the interests of banks' shareholders and management, but not with the interests of the general public. This is unsatisfactory from a normative point of view, as significant public resources are used for banking supervision.
Keywords: Risk measures, Basel Accord, Value at Risk
JEL Classification: K2, G2
Suggested Citation: Suggested Citation