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Value at Risk for Capital Reserve Requirement Regulation in Ukrainian Banks
Company: Ukraine National University
Year Of Publication: 2006
Month Of Publication: May
Pages: 50
Download Count: 639
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Comment Num: 0
Language: EN
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Who Can Read: Free
Date: 11-26-2006
Publisher: Administrator
Summary
Value at Risk (VaR) has been widely promoted by the Bank for InternationalSettlement as well as central banks of the developed countries as a way ofmonitoring and managing market risk and as a basis for setting regulatoryminimum capital reserves. The thesis studies the market risk estimationmethodology VaR and its implementation in the big size Ukrainian bank fordetermining the capital reserve requirement. Three VaR methods, namelyVariance/Covariance method, Historical simulation and Monte Carlosimulation, are applied for the considered bank. The Variance/Covariancematrix of risk factors is estimated using GARCH models. The empiricalresults show that all three VaR methods are adequate to use in the bank, butVariance/Covariance method overestimates VaR, Historical simulation andMonte Carlo simulation underestimate VaR. Nevertheless, Historicalsimulation is chosen as the best method for the considered time period ofdata. The market risk is defined as 18169 UAH and market risk capitalreserves are defined as 59594 UAH. The results of the thesis are implementedin the big size Ukrainian bank; therefore, VaRs are monitoring and capitalreserves are defined daily there.
Author(s)
Kravets, Iryna Sign in to follow this author
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