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intra-horizon risk sign in to follow this
square-root of time sign in to follow this
probability of breach sign in to follow this
first passage time sign in to follow this
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VaR Methods sign in to follow this
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Re-Examining the Contributions of Intra-Horizon Risk Measures
Year Of Publication: 2011
Month Of Publication: August
Pages: 25
Download Count: 3
View Count: 933
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 11-13-2012
Publisher: Administrator
Summary
We in this paper reviewed the existing literature regarding “intra-horizon risks” and examined the contributions of the three intra-horizon risk measures: Intra-Horizon Value-at-Risk (I-VaR), Intra-Horizon Expected Shortfall (I-ES), and Intra-Horizon Probability of Breaching (I-PB). Using Brownian motion as the benchmark case, we calculated the multiples of I-VaR/VaR, I-ES/ES, and I-PB/PB to facilitate evaluate their possible contributions. From the numerical examples we found that though more discussed, I-VaR/VaR multiples were generally covered by the multiplier set forth in the Internal Models Approach of the Basel Accord and thus might only have limited contributions in risk management. On the contrary, the significant I-PB/PB multiples seemed to suggest that I-PB, the physical probability of breaching a certain threshold during the time horizon, would be a more promising risk indicator.
Author(s)
Yen, Simon H. Sign in to follow this author
Lin, Shao-Chieh Sign in to follow this author
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