A VAR Model as Risk Management Tool and Risk Adjusted Performance Measures
15 Pages Posted: 25 Apr 1999
Date Written: December 1998
Abstract
We provide evidence for risk management as a value creation activity. To test this proposition, we introduce risk control in portfolio decision making where in order to assess risk we developed a VaR model that is able to take in multidimensional risks. Then we ran out a simulation according to Italian banking operational procedures: our evidence shows a better performance both as total return and as Sharpie ratio. We argue that Basle standard requirements are less heavier than ones granted by internal models, modified by prudential coefficients.
JEL Classification: G21, G11, G31
Suggested Citation: Suggested Citation
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