Economics, Econometrics and Finance
4 years ago

New Study Reveals Impact of Value-at-Risk Models on Financial Stability

Federal Reserve Bank of New York Economic policy review
Evaluation of Value-at-Risk Models Using Historical Data
Darryll Hendricks

Paper Summary

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The article evaluates how well value-at-risk models work by testing them on 1,000 foreign exchange portfolios from 1983-94. These models are used to measure the risk of a portfolio of financial assets by combining different types of market risks into one number. They are endorsed by financial and regulatory bodies for assessing potential losses over a specific time period. The study aims to see how effective these models are in practice.