Finance/Investment Beyond Value at Risk The New Science of Risk Management A Comprehensive Guide to Value at Risk and Risk Management Risk management and measurement are now, without doubt, the hottest topics in the finance world. Today, quantifying risk management is not only a management tool - but is also used by regulators for banks and finance houses. Beyond Value at Risk provides a comprehensive guide to recent developments and existing approaches to VaR and risk management, going beyond traditional approaches to the subject and offering a new, far-reaching perspective on investment, hedging and portfolio decision-making. The key to this distinctive approach is a new decision rule - the 'Generalised Sharpe Rule', and its practical applications. Beyond Value at Risk provides the answers to key questions, including: * How to implement VaR and related systems in the real world * How to make vital investment decisions and estimate their effect * How to make hedging decisions * How to manage a portfolio It offers financial professionals, academics and students comprehensive coverage of VaR both in theory and practice.

The use of derivative products in risk management has spread from commodities, stocks and fixed income items, to such virtual commodities as energy, weather and bandwidth. All this can give rise to so-called volatility and there has been a consequent development in formal risk management techniques to cover all types of risk: market, credit, liquidity, etc. One of these techniques, Value at Risk, was developed specifically to help manage market risk over short periods. Its success led, somewhat controversially, to its take up and extension to credit risk over longer time-scales. This extension, ultimately not successful, led to the collapse of a number of institutions. The present book, which was originally published in 2002, by some of the leading figures in risk management, examines the complex issues that concern the stability of the global financial system by presenting a mix of theory and practice.

Master's Thesis from the year 2007 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1 (A), University of Graz (Institut für Finanzwirtschaft), language: English, abstract: This thesis provides an exhaustive and well-founded overview of risk measures, in particular of Value at Risk (VaR) and risk measures beyond VaR. Corporations are exposed to different kinds of risks and therefore risk management has become a central task for a successful company. VaR is nowadays widely adapted internationally to measure market risk and is the most frequently used risk measure amongst practitioners due to the fact that the concept offers several advantages. However, VaR also has its drawbacks and hence there have been and still are endeavours to improve VaR and to find better risk measures. In seeking alternative risk measures to try to overcome VaR’s disadvantages, while still keeping its advantages, risk measures beyond VaR were introduced. The most important alternative risk measures such as Tail Conditional Expectation, Worst Conditional Expectation, Expected Shortfall, Conditional VaR, and Expected Tail Loss are presented in detail in the thesis. It has been found that the listed risk measures are very similar concepts of overcoming the deficiencies of VaR and that there is no clear distinction between them in the literature – ‘confusion of tongues’ would be an appropriate expression. Two concepts have become widespread in the literature in recent years: Conditional VaR and Expected Shortfall, however there are situations where it can be seen that these are simply different terms for the same measure. Additionally other concepts are touched upon (Conditional Drawdown at Risk, Expected Regret, Spectral Risk Measures, Distortion Risk Measures, and other risk measures) and modifications of VaR (Conditional Autoregressive VaR, Modified VaR, Stable modelling of VaR) are introduced. Recapitulatory the basic findings of the thesis are that there are numerous sophisticated alternative measures and concepts readily available, that there prevails a ‘confusion of tongues’ with the alternative risk measures in the respective literature and that promising theories and models are on the verge of entering the mainstream financial risk management stage. At the end of the day however neither VaR nor any other introduced risk measure is perfect. There are certain limitations aligned with every method; no single method is the best risk measure.

The most up-to-date resource on market risk methodologies Financial professionals in both the front and back office require an understanding of market risk and how to manage it. Measuring Market Risk provides this understanding with an overview of the most recent innovations in Value at Risk (VaR) and Expected Tail Loss (ETL) estimation. This book is filled with clear and accessible explanations of complex issues that arise in risk measuring-from parametric versus nonparametric estimation to incre-mental and component risks. Measuring Market Risk also includes accompanying software written in Matlab—allowing the reader to simulate and run the examples in the book.

Master's Thesis from the year 2007 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1 (A), University of Graz (Institut für Finanzwirtschaft), language: English, abstract: This thesis provides an exhaustive and well-founded overview of risk measures, in particular of Value at Risk (VaR) and risk measures beyond VaR. Corporations are exposed to different kinds of risks and therefore risk management has become a central task for a successful company. VaR is nowadays widely adapted internationally to measure market risk and is the most frequently used risk measure amongst practitioners due to the fact that the concept offers several advantages. However, VaR also has its drawbacks and hence there have been and still are endeavours to improve VaR and to find better risk measures. In seeking alternative risk measures to try to overcome VaR's disadvantages, while still keeping its advantages, risk measures beyond VaR were introduced. The most important alternative risk measures such as Tail Conditional Expectation, Worst Conditional Expectation, Expected Shortfall, Conditional VaR, and Expected Tail Loss are presented in detail in the thesis. It has been found that the listed risk measures are very similar concepts of overcoming the deficiencies of VaR and that there is no clear distinction between them in the literature - 'confusion of tongues' would be an appropriate expression. Two concepts have become widespread in the literature in recent years: Conditional VaR and Expected Shortfall, however there are situations where it can be seen that these are simply different terms for the same measure. Additionally other concepts are touched upon (Conditional Drawdown at Risk, Expected Regret, Spectral Risk Measures, Distortion Risk Measures, and other risk measures) and modifications of VaR (Conditional Autoregressive VaR, Modified VaR, Stable modelling of VaR) are introduced. Recapitulatory the basic findings of the thesis are that t

Risk can be both a threat to a firm's financial health and an opportunity to get ahead of the competition. Most analysts, when they refer to risk management, focus on the threat posed by risk and emphasize protecting against that threat (i.e. risk hedging). In keeping with this narrow definition of risk management, the risk associated with an investment is almost always reflected in the discount rate in conventional discounted cash flow models. Since we also assume that only market risk affects discount rates, it follows that firms that expend time and resources in hedging firm-specific risk will lose value to the extent that risk management is expensive. Firms that reduce exposure to systematic risk will see no effect on value, if risk-hedging products are fairly priced. In this paper, we consider ways in which we can broaden both the definition of risk management to include ways of exploiting risk to gain a competitive advantage and the analysis of the effects on value. We argue that risk management can affect expected cash flows by altering investment policy and creating competitive advantages, which in turn can have consequences for expected growth rates and excess returns. This offers the potential for a payoff to risk management for many firms that may not benefit from risk hedging. In the closing part of this paper, we consider the steps involved in developing a comprehensive strategy for dealing with risk.

Dealing with all aspects of risk management that have undergone significant innovation in recent years, this book aims at being a reference work in its field. Different to other books on the topic, it addresses the challenges and opportunities facing the different risk management types in banks, insurance companies, and the corporate sector. Due to the rising volatility in the financial markets as well as political and operational risks affecting the business sector in general, capital adequacy rules are equally important for non-financial companies. For the banking sector, the book emphasizes the modifications implied by the Basel II proposal. The volume has been written for academics as well as practitioners, in particular finance specialists. It is unique in bringing together such a wide array of experts and correspondingly offers a complete coverage of recent developments in risk management.