Possible loss of a position or a portfolio – during a certain period (= risk horizon), which – with a previously defined probability (= confidence level) – will not be exceeded (an investor’s maximum potential loss on the value of an asset or a portfolio of financial assets and liabilities, based on the investment timeframe and a confidence interval. This potential loss is calculated on the basis of historical data or deduced from normal statistical laws). – The calculation in stress tests is usually based on variables over a longer observation period – around three years. In practice, VaR is a popular portfolio theory that can be further statistically refined. There is conflicting information on the accuracy of such calculations. – Incidentally, the Value at Risk ratio goes back to the request of a board member of the North American investment bank J.P. Morgan. At the end of a trading day, he demanded a single figure that represented the maximum loss of all the bank’s exposures. – See downside risk, expected shortfall, Gini coefficient, Herfindahl-Hirschman index, intercreditor agreement, confidence level, upside risk. – Cf. Monthly Report of the Deutsche Bundesbank of September 2005, pp. 62 ff. (detailed presentation; references in the footnotes), Monthly Report of the Deutsche Bundesbank of June 2006, pp. 40 ff. (with reference to borrower concentration), Monthly Report of the Deutsche Bundesbank of December 2007, pp. 59 ff. (with reference to the minimum requirements for risk management at banks).

Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/

Kommentare geschlossen.