The Ten Commandments for Managing Value-at-Risk
Under the Basel II Accord
| dc.contributor.author | Jiménez Martín, Juan Ángel | |
| dc.contributor.author | McAleer, Michael | |
| dc.contributor.author | Pérez Amaral, Teodosio | |
| dc.date.accessioned | 2023-06-20T09:17:45Z | |
| dc.date.available | 2023-06-20T09:17:45Z | |
| dc.date.issued | 2009 | |
| dc.description.abstract | Under the Basel II Accord, banks and other Authorized Deposit-taking Institutions (ADIs) are required to communicate their daily market risk estimates to the relevant national monetary authority at the beginning of each trading day, using one of a variety of Value-at-Risk (VaR) models to measure risk. The purpose of this paper is to provide a simple explanation and a set of prescriptions for managing VaR under the Basel II Accord. The commandments deal with understanding the Basel II colours, understanding the risk model before choosing, varying the choice of risk model,avoiding the green zone and being willing to violate, incurring large violations, stopping before the red zone, avoiding frequent violations, avoiding the estimation of large portfolios, aggregating portfolios into a single index, and interpreting commandments sensibly as guidelines. | |
| dc.description.faculty | Fac. de Ciencias Económicas y Empresariales | |
| dc.description.faculty | Instituto Complutense de Análisis Económico (ICAE) | |
| dc.description.refereed | TRUE | |
| dc.description.sponsorship | Secretaría de Estado de Universidades de España | |
| dc.description.sponsorship | Universidad Complutense de Madrid | |
| dc.description.sponsorship | Australian Research Council | |
| dc.description.status | pub | |
| dc.eprint.id | https://eprints.ucm.es/id/eprint/8691 | |
| dc.identifier.relatedurl | https://www.ucm.es/icae | |
| dc.identifier.uri | https://hdl.handle.net/20.500.14352/49259 | |
| dc.issue.number | 12 | |
| dc.language.iso | eng | |
| dc.page.total | 10 | |
| dc.publication.place | Madrid | |
| dc.publisher | Facultad de CC Económicas y Empresariales. Instituto Complutense de Análisis Económico | |
| dc.relation.ispartofseries | Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE) | |
| dc.relation.projectID | SEJ206-14354 | |
| dc.relation.projectID | UCM-940063 | |
| dc.relation.projectID | ECO2008-06091/ECON. | |
| dc.rights.accessRights | open access | |
| dc.subject.jel | G32 | |
| dc.subject.jel | G11 | |
| dc.subject.jel | G17 | |
| dc.subject.keyword | Financial portfolios | |
| dc.subject.keyword | Daily capital Charges | |
| dc.subject.keyword | Frequency of violations | |
| dc.subject.keyword | Magnitude of violations | |
| dc.subject.keyword | Optimizing strategy | |
| dc.subject.keyword | Risk forecasts | |
| dc.subject.keyword | Value-at-risk | |
| dc.subject.keyword | Green zone | |
| dc.subject.keyword | Red zone. | |
| dc.subject.ucm | Finanzas | |
| dc.subject.ucm | Contabilidad (Economía) | |
| dc.subject.unesco | 5303 Contabilidad Económica | |
| dc.title | The Ten Commandments for Managing Value-at-Risk Under the Basel II Accord | |
| dc.type | technical report | |
| dc.volume.number | 2009 | |
| dcterms.references | Asai, M., M. McAleer and J. Yu (2006), Multivariate stochastic volatility: a review, Econometric Reviews, 25, 145-175. Basel Committee on Banking Supervision, (1988), International Convergence of Capital Measurement and Capital Standards, BIS, Basel, Switzerland. Basel Committee on Banking Supervision, (1995), An Internal Model-Based Approach to Market Risk Capital Requirements, BIS, Basel, Switzerland. Basel Committee on Banking Supervision, (1996), Supervisory Framework for the Use of “Backtesting” in Conjunction with the Internal Model-Based Approach to Market Risk Capital Requirements, BIS, Basel, Switzerland. Caporin, M. and M. McAleer (2009a), Do we really need both BEKK and DCC? A tale of two covariance models, Department of Economics, University of Padova (Available at SSRN: http://ssrn.com/abstract=1338190). Caporin, M. and M. McAleer (2009b), The Ten Commandments for managing investments, to appear in Journal of Economic Surveys (Available at SSRN: http://ssrn.com/abstract=1342265). Jorion, P. (2000), Value at Risk: The New Benchmark for Managing Financial Risk, McGraw-Hill, New York. Li, W.K., S. Ling and M. McAleer (2002), Recent theoretical results for time series models with GARCH errors, Journal of Economic Surveys, 16, 245-269. Reprinted in M. McAleer and L. Oxley (eds.), Contributions to Financial Econometrics: Theoretical and Practical Issues, Blackwell, Oxford, 2002, pp. 9-33. McAleer, M. (2005), Automated inference and learning in modeling financial volatility, Econometric Theory, 21, 232-261. McAleer, M. (2009), The Ten Commandments for optimizing value-at-risk and daily capital charges, to appear in Journal of Economic Surveys (Available at SSRN: http://ssrn.com/abstract=1354686). McAleer, M., J.-Á. Jiménez-Martin and T. Pérez-Amaral (2009), A decision rule to minimize daily capital charges in forecasting value-at-risk, Department of Quantitative Economics, Complutense University of Madrid, Spain (Available at SSRN: http://ssrn.com/abstract=1349844). McAleer. M. and M.C. Medeiros (2008a), Realized volatility: a review, Econometric Reviews, 27, 10-45. McAleer, M. and B. da Veiga (2008a), Forecasting value-at-risk with a parsimonious portfolio spillover GARCH (PS-GARCH) model, Journal of Forecasting, 27, 1-19. McAleer, M. and B. da Veiga (2008b), Single index and portfolio models for forecasting value-at-risk thresholds, Journal of Forecasting, 27, 217-235. RiskmetricsTM (1996), J.P. Morgan Technical Document, 4th Edition, New York, J.P. Morgan. | |
| dspace.entity.type | Publication | |
| relation.isAuthorOfPublication | 05235eb8-c478-4f0b-ada4-68ba02d31095 | |
| relation.isAuthorOfPublication | 14ac85fa-418f-40ee-b712-4075cd494574 | |
| relation.isAuthorOfPublication.latestForDiscovery | 05235eb8-c478-4f0b-ada4-68ba02d31095 |
Download
Original bundle
1 - 1 of 1
