This seminar paper is divided in the following chapters:
1. Definition of Value at Risk: What is VaR, several definitions of this figure.
2. The three common approaches for calculating Value at Risk: Historical simulation,
Monte Carlo simulation, Variance-Covariance model.
3. The critical view: Problems and limitations of Value at Risk. Which approach can be meaningfully used and when not? Why is Value at Risk not the “only truth” in financial institutions? What are the strengths and weaknesses of the several approaches in calculating Value at Risk?
Inhaltsverzeichnis (Table of Contents)
- I. Introduction: What I am going to talk about?
- II. Definition of Value at Risk
- III. How to calculate Value at Risk - the common approaches
- III.1. Variance-Covariance model
- III.2. Historical Simulation
- III.3. Monte Carlo Simulation
- IV. Summary – Problems and critics
- IV.1. Problems of Value at Risk
- IV.2. Value at Risk: And beyond?
- IV.3 Overview: Advantages and problems of the VaR calculations
- V: Finally: Which way is the best?
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This seminar paper aims to provide a comprehensive understanding of Value at Risk (VaR), a crucial measure in financial risk management. It delves into the definition, different calculation approaches, and critically examines the limitations and strengths of VaR in practical applications.
- Definition and interpretation of Value at Risk
- Common approaches for calculating Value at Risk: Variance-Covariance model, Historical Simulation, and Monte Carlo Simulation
- Critical evaluation of Value at Risk: Limitations, strengths, and alternative risk measures
- Practical applications of Value at Risk in financial institutions
- Comparison of different Value at Risk approaches and their suitability for various situations
Zusammenfassung der Kapitel (Chapter Summaries)
Chapter I introduces the topic of the seminar paper, outlining the structure and key areas to be explored. Chapter II defines Value at Risk and discusses its role as a central risk management tool in financial institutions. Chapter III elaborates on the three common approaches for calculating Value at Risk: the Variance-Covariance model, Historical Simulation, and Monte Carlo Simulation. Each approach is presented with detailed explanations and examples.
Schlüsselwörter (Keywords)
Value at Risk (VaR), risk management, financial institutions, variance-covariance model, historical simulation, Monte Carlo simulation, risk factors, confidence level, time horizon, expected shortfall, coherent risk measure, limitations, strengths, practical applications.
- Citar trabajo
- Alexander Melichar (Autor), 2009, Problems of Value At Risk - A Critical View, Múnich, GRIN Verlag, https://www.grin.com/document/162499
