German Banks' Risk Underestimated: Portfolio Value at Risk Analysis Reveals Surprising Results
The article analyzes how to calculate the overall risk of a portfolio made up of different German banks from 2001 to 2003. By looking at daily profits and losses, the researchers found that the total risk of the portfolio can be estimated accurately. They discovered that during normal times, the total risk is lower than the sum of individual risks. Additionally, the risk contribution of each bank varies, with some banks having a higher impact on the overall risk than others.