Bank Capital and Value at Risk

Bank of England Working Paper No. 79

37 Pages Posted: 3 Oct 1998

See all articles by Patricia Jackson

Patricia Jackson

Bank of England

David Maude

Bank of England - Monetary Analysis

William Perraudin

Imperial College London - Accounting, Finance, and Macroeconomics

Date Written: 1998

Abstract

To measure the risks involved in their trading operations, major banks are increasingly employing Value-at-Risk (VaR) models. In an important regulatory innovation, the Basle Committee has accepted that such models can be used in the determination of the capital that banks must hold to back their securities trading. This paper examines the empirical performance of different VaR models using data on the actual fixed income, foreign exchange and equity security holdings of a large bank. It also examines how a bank applying the models would have fared in the past if the proposed rules had been in operation.

JEL Classification: G21, G28

Suggested Citation

Jackson, Patricia and Maude, David and Perraudin, William, Bank Capital and Value at Risk (1998). Bank of England Working Paper No. 79. Available at SSRN: https://ssrn.com/abstract=87288 or http://dx.doi.org/10.2139/ssrn.87288

Patricia Jackson (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

David Maude

Bank of England - Monetary Analysis

Threadneedle Street
London EC2R 8AH
United Kingdom

William Perraudin

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom

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