Document Search
Add To My Bookshelf Sign in or Register Save And Annotate
Keywords:

bank sign in to follow this
backtesting sign in to follow this
diversification sign in to follow this
Categories:

VaR Methods sign in to follow this
--Evaluation/Comparison sign in to follow this
Half-Life:
Impact:
Discuss This Paper
Sign in to follow this page
Recent Comments
  more
Diversification and Value-at-Risk
Year Of Publication: 2008
Month Of Publication: September
Pages: 29
Download Count: 213
View Count:
Comment Num: 0
Language: EN
Source: article
Who Can Read: Free
Date: 11-25-2007
Publisher: Administrator
Summary
A pervasive and puzzling feature of banks’ Value at Risk (VaR) is its abnormally highlevel, which leads to excessive regulatory capital. A possible explanation for the tendencyof commercial banks to overstate their VaR is that they incompletely account for thediversification effect among broad risk categories (e.g. equity, interest rate, commodity,credit spread, and foreign exchange). By underestimating the diversification effect,bank’s proprietary VaR models produce overly prudent market risk assessments. In thispaper, we examine empirically the validity of this theory using actual VaR data frommajor US commercial banks. In contrast to the VaR diversification theory, we find thatUS banks show no sign of systematic underestimation of the diversification effect. Inparticular, diversification effect used by banks is very close to (and quite often largerthan) our empirical diversification estimate
This document is published in Journal of Banking and Finance (volume 34, number 1) January 2010, 55-66.
http://dx.doi.org/10.1016/j.jbankfin.2009.07.003
Author(s)
Perignon, Christophe Sign in to follow this author
Smith, Daniel R. Sign in to follow this author
This document's citation network:
Similar Documents:
Close window
Sign up in one step, no personal information required. Already a Member?



Email:
Repeat Email:
User Name:
Password:
Confirm Password:

Sign Up


Welcome to GloriaMundi!
Thanks for singning up



continue or edit your profile