n South African Journal of Economic and Management Sciences - Trading book risk metrics : a South African perspective
|Article Title||Trading book risk metrics : a South African perspective|
|© Publisher:||University of Pretoria|
|Journal||South African Journal of Economic and Management Sciences|
|Affiliations||1 North-West University and 2 North-West University|
|Publication Date||Jan 2016|
|Pages||118 - 138|
|Keyword(s)||Bubble VaR, Expected shortfall, Procyclical, Trading book and Value at risk|
ISI Social Science
The regulatory market risk metric - Value at Risk - has remained virtually unchanged since its introductionby JP Morgan in 1996. Many prominent examples of market risk underestimation have undermined the credibility of VaR, prompting the search for better, more robust measures. Expected shortfall and procyclical capital buffers have been proposed by regulatory authorities, but neither is without problems. Bubble VaR - a coherent measure which avoids many of the pitfalls to which other measures have succumbed - was designed to be both forward-looking and countercyclical. Although tested on other markets, here it is applied to various South African prices and the results compared with both international observations and other market risk measures. Bubble VaR is found to perform consistently and reliably under all market conditions.
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