Download or read book Is Mean Value at Risk a Substitute Or a Complement for Mean Variance in Risk Management An Empirical Evidence from Emerging Markets written by Navneet Kaur and published by . This book was released on 2019 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding and managing risks is one of the major challenges in finance discipline. Existing literature considers Value-at-Risk (VaR) as an effective statistical approach for risk management. An exhaustive literature review reveals that empirical evidences on VaR are mostly in the context of developed economies. Extending these findings for risk management in developing economies, where financial markets are not as efficient as of developed economies, is debatable. This paper explored the applicability of VaR for risk management in the context of developing economies to address this gap. This paper further upgraded the VaR as decision variable in portfolio optimization when investors are more concerned with downside risk. We compared Mean-Variance efficient frontier with Mean-VaR efficient frontier for Indian stock market and our empirical evidences suggest that Mean VaR efficient frontier for portfolio optimization is more appealing as it improved the skewness of the portfolio.
Download or read book Value at Risk in Emerging Markets written by Helder Centeno and published by . This book was released on 2006 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study focuses on the relative performance of three Value-at-Risk (VaR) estimation methodologies. The daily stock market index returns of twelve different emerging markets are used for the empirical analysis. In addition to the well-known methodologies, such as the historical simulation and GARCH-based ones, the extreme value theory (EVT) is also used to estimate the daily VaR. In this paper, we focus on EVT because it studies the non-linear estimation of the tails and we expect to find many extreme events when analysing the return distributions in these twelve emerging markets. We focus on the negative extreme events rather than on the positive ones. The daily VaR is forecasted at three different quantile levels: 90%, 97.5%, 99.9%; and competing methodologies are back-tested accordingly. The results indicate that the historical simulation and GARCH-based methodologies work better at lower quantile levels than they do at higher quantile levels, while VaR estimated using EVT is more accurate at higher quantiles. EVT provides better information about extreme events, especially when financial distress occurs in these economies.
Download or read book Failure at Value at Risk as a Risk Management Tool written by Rizwan Khalid and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Idiosyncratic Risk written by Mr.Anthony J. Richards and published by International Monetary Fund. This book was released on 1999-11-01 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper models the idiosyncratic or asset-specific return of an asset as the return on a portfolio that is long in that asset and short in other assets in the same class, thereby removing the common components of returns. This is the type of “hedged” position that is held by relative-value investors. Weekly returns data for seven different asset classes suggest that idiosyncratic risk is: higher at times of large return outcomes for the asset class as a whole; positively autocorrelated; and correlated across different asset classes. The implications for risk management are discussed.
Download or read book Market Risk in Transition Countries Value at Risk Approach written by Sasa Zikovic and published by . This book was released on 2010-08 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt: When using Value at Risk (VaR) models, created and suited for developed and liquid markets, in developing transition markets practitioners and researchers are often troubled with the same questions: Do the VaR model, developed and tested in the developed and liquid financial markets apply to the volatile and shallow financial markets of transition countries? Do the commonly used VaR models adequately capture the market risk of these markets or do they only give a false sense of security? This book gives the answers to such questions and represents the first systematic study of risk management issues in transition markets. It gives an unique empirical analysis of all European transition markets, and presents a new method for calculating VaR in volatile transition markets taking into account the main characteristics of these markets (abrupt changes in the volatility regimes, autoregression, heteroskedasticity, asymmetry and fat tails).
Download or read book Value at Risk written by Philippe Jorion and published by . This book was released on 1997 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Value at risk Reference written by Jon Danielsson and published by Risk. This book was released on 2007 with total page 539 pages. Available in PDF, EPUB and Kindle. Book excerpt: A one-stop reference pulling together leading published research and analysis about VaR and market risk. An invaluable summary for practitioners and researchers looking for an independent evaluation of VaR and insight into how and when it should be used.
Download or read book The New Hybrid Value at Risk Approach Based on the Extreme Value Theory written by Nikola Radivojevic and published by . This book was released on 2016 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper the authors introduce a new hybrid approach based on the Extreme Value Theory (EVT) to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. The approach is suitable for measuring market risk in the emerging markets. It is designed to capture the empirical features of returns with emerging markets, such as leptokurtosis, asymmetry, autocorrelation and heteroscedasticity.
Download or read book Beyond Mean Variance written by Hayne E. Leland and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Most practitioners use the capital asset pricing model (CAPM) to measure risk and investment performance. The CAPM, however, assumes either that all asset returns are normally distributed (and thus symmetrical) or that investors have mean-variance preferences (and thus ignore skewness and higher order moments). Both assumptions are suspect. Assuming only that the rate of return on the MARKET portfolio is i.i.d. and that markets are quot;perfectquot;, this article shows that the CAPM and its risk measures are invalid: The market portfolio is mean-variance inefficient, and the CAPM alpha mismeasures the value added by investment managers. This mismeasurement is particularly pronounced for portfolios using options or related dynamic strategies. Strategies with positively skewed returns (relative to the market), such as strategies limiting downside risk, will incorrectly be given negative alphas. A simple modification of the CAPM beta, however, will produce correct risk measurement for portfolios with arbitrary return distributions, and the resulting alphas of all fairly-priced options and/or dynamic strategies will be zero. The risk and performance measures require no more information to implement than the CAPM. In contrast with other ad hoc risk measures, such as VaR or the quot;Sortino ratioquot;, our risk measure is built on an equilibrium model of asset pricing.
Download or read book Efficiency and Anomalies in Stock Markets written by Wing-Keung Wong and published by Mdpi AG. This book was released on 2022-02-17 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.
Download or read book Economic Implications of Using a Mean VaR Model for Portfolio Selection written by Gordon J. Alexander and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We relate Value at Risk (VaR) to mean-variance analysis and examine the economic implications of using a mean-VaR model for portfolio selection. When comparing two mean-variance efficient portfolios, the higher variance portfolio might have less VaR. Consequently, an efficient portfolio that globally minimizes VaR may not exist. Surprisingly, we show that it is plausible for certain risk-averse agents to end up selecting portfolios with larger standard deviations if they switch from using variance to VaR as a measure of risk. Therefore, regulators should be aware that VaR is not an unqualified improvement over variance as a measure of risk.
Download or read book Artificial Intelligence in Asset Management written by Söhnke M. Bartram and published by CFA Institute Research Foundation. This book was released on 2020-08-28 with total page 95 pages. Available in PDF, EPUB and Kindle. Book excerpt: Artificial intelligence (AI) has grown in presence in asset management and has revolutionized the sector in many ways. It has improved portfolio management, trading, and risk management practices by increasing efficiency, accuracy, and compliance. In particular, AI techniques help construct portfolios based on more accurate risk and return forecasts and more complex constraints. Trading algorithms use AI to devise novel trading signals and execute trades with lower transaction costs. AI also improves risk modeling and forecasting by generating insights from new data sources. Finally, robo-advisors owe a large part of their success to AI techniques. Yet the use of AI can also create new risks and challenges, such as those resulting from model opacity, complexity, and reliance on data integrity.
Download or read book Risk Analysis and Portfolio Modelling written by Elisa Luciano and published by MDPI. This book was released on 2019-10-16 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Risk Measurement is a challenging task, because both the types of risk and the techniques evolve very quickly. This book collects a number of novel contributions to the measurement of financial risk, which address either non-fully explored risks or risk takers, and does so in a wide variety of empirical contexts.
Download or read book Does Total Risk Matter The Case of Emerging Markets written by Eric Girard and published by . This book was released on 2016 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationships between market risk premiums, time-varying variance and covariance in forty-eight emerging, and seven developed capital markets. We allow each market's risk premium generating process to be state-dependent by accounting for negative and positive market price of variance and covariance risk. We find that half of the emerging markets exhibit reward to world variance while for the other half are only sensitive to local risk factors. We also find evidence of a negative relationship between reward to local risk and reward to world risk. Accordingly, the relative importance of one reward versus the other depends on the ever-changing correlation with the world market. Finally, we show that correlation is not a factor that explains reward to local risk in few segmented capital markets.
Download or read book Variance Risk Premiums in Emerging Markets written by Fang Qiao and published by . This book was released on 2019 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: We construct variance risk premiums for the nine major emerging markets of Brazil, China, India, South Korea, Mexico, Poland, Russia, South Africa, and Taiwan from 2000 to 2017 using the sample-extension methodology in Lynch and Wachter (2013). Both the emerging market and developed market variance risk premiums can predict stock market returns. However, the former is more important for longer horizons (beyond four months), whereas the latter is more important for shorter horizons (within four months). The partial integration of emerging markets and global economic uncertainty exposure may explain these different predictability patterns.
Download or read book Credit Risk Management In and Out of the Financial Crisis written by Anthony Saunders and published by John Wiley & Sons. This book was released on 2010-04-16 with total page 373 pages. Available in PDF, EPUB and Kindle. Book excerpt: A classic book on credit risk management is updated to reflect the current economic crisis Credit Risk Management In and Out of the Financial Crisis dissects the 2007-2008 credit crisis and provides solutions for professionals looking to better manage risk through modeling and new technology. This book is a complete update to Credit Risk Measurement: New Approaches to Value at Risk and Other Paradigms, reflecting events stemming from the recent credit crisis. Authors Anthony Saunders and Linda Allen address everything from the implications of new regulations to how the new rules will change everyday activity in the finance industry. They also provide techniques for modeling-credit scoring, structural, and reduced form models-while offering sound advice for stress testing credit risk models and when to accept or reject loans. Breaks down the latest credit risk measurement and modeling techniques and simplifies many of the technical and analytical details surrounding them Concentrates on the underlying economics to objectively evaluate new models Includes new chapters on how to prevent another crisis from occurring Understanding credit risk measurement is now more important than ever. Credit Risk Management In and Out of the Financial Crisis will solidify your knowledge of this dynamic discipline.
Download or read book A Coupling of Extreme Value Theory and Volatility Updating with Value at Risk Estimation in Emerging Markets written by Anthony Seymour and published by . This book was released on 2016 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: This research is aimed at a formal appraisal of recent advancements in stochastic volatility modeling and extreme-value theory to application of value-at-risk computation in particularly volatile markets. Established methods such as historical simulation are prone to underestimating value-at-risk in such developing markets. Two contemporary methods of value-at-risk calculation are tested on a representative portfolio of South African stocks. The first method incorporates extreme value theory. The second model includes both extreme value theory and volatility updating (via GARCH-type modeling). The combined GARCH-type time-series approach and extreme value theory model is found to provide significantly better results than both straightforward historical simulation as well as the extreme value model. In no instance, however, were results on these VaR methods as good as those obtained when the same methods were tested in developed markets.
