Abstract
One main concern of market risk management is to guess the plausible future behavior of a portfolio’s value. There are two main parts to this:
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1.
Estimate asset price movements: compute returns and generate scenarios.
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2.
Determine the impact of those movements on the positions’ values and distill portfolio risk measures: price positions, aggregate results, and summarize.
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Notes
- 1.
Other return types for interest rates can commonly be encountered (see Chap. 9).
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A simpler rescaling procedure would be to just rescale all returns with the same constant to achieve the desired target volatility. The drawback here is that—potentially brief—high-vola regimes would dominate the resulting correlation disposition.
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Note that S 0 coincides with the latest, most recent historical scenario H 520.
- 4.
The various operators in fields like signal or image processing are often called filters.
- 5.
So named after Boudoukh, Richardson, and Whitelaw.
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Auer, M. (2018). Historical Value-at-Risk. In: Hands-On Value-at-Risk and Expected Shortfall. Management for Professionals. Springer, Cham. https://doi.org/10.1007/978-3-319-72320-4_4
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DOI: https://doi.org/10.1007/978-3-319-72320-4_4
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Publisher Name: Springer, Cham
Print ISBN: 978-3-319-72319-8
Online ISBN: 978-3-319-72320-4
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