SUMMARY

• Edited collection of 40 articles tracing the development, applications and future of this ubiquitous methodology

• Section introductions from KPMG risk strategists give background, summarise papers and highlight major themes

• Provides methodologies for selecting and improving VAR as well as corporate applications and firmwide risk management

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  TABLE OF CONTENTS

CONTENTS

Foreword

I. INTRODUCING VAR

Introduction
Martin E Titus Jr and Donald Lewis

Variations on a Theme
Nick Reed

How to Calculate VAR
Charles Smithson with Lyle Minton

The Right VAR
Charles Smithson with Lyle Minton

Banks Grasp the VAR Nettle
Dan Heron and Richard Irving

The Right Approach
Kenneth Leong

Quality Control
Cedomir Crnkovic and Jordan Drachman

Operating Procedures
Douglas Hoffman and Marta Johnson

II. ASSESSING VAR

Introduction
Dori Nagar and Richard Singer

How Safe is RiskMetrics?
Colin Lawrence and Gary Robinson

A Transparent Tool
Jacques Longerstaey and Peter Zangari

Optional Extras
Sumit Paul-Choudhury

Expect the Worst
Jacob Boudoukh, Matthew Richardson and Robert Whitelaw

Model Risk
Emanuel Derman

Improving on VAR
Mark Garman

More Haste, Less Precision
Gary Robinson

Why VAR is in Vogue

Margins of Error
Gabriel Bousbib

VAR: Seductive but Dangerous
Tanya Styblo Beder

Report Card on Value at Risk: High Potential but Slow Starter
Tanya Styblo Beder

Value at Risk - New Approaches to Risk Management
Katerina Simons

Value at Risk: A New Methodology for Measuring Portfolio Risk
Gregory Hopper

Evaluation of Value-at-Risk Models Using Historical Data
Darryl Hendricks

Bank Capital and Value at Risk
Patricia Jackson, David J Maude and William Perraudin

Risk2: Measuring the Risk in Value at Risk
Philippe Jorion

Techniques for Verifying the Accuracy of Risk Measurement Models
Paul H Kupiec

III. SELECTING AND IMPROVING VAR METHODOLOGIES: NEW RESEARCH

Introduction
Andrew Smith

Beyond VAR and Stress Testing
Julian Shaw

VAR Analytics: Portfolio Structure, Key Rate Convexities and VAR Betas
Thomas Ho, Michael Chen and Fred Eng

Evaluating VAR Methodologies: Accuracy versus Computational Time
Matt Pritsker

Value-at-Risk: Implementing a Risk Measurement Standard
Chris Marshall and Michael Siegel

Principals of Risk: Finding VAR through Factor-Based Interest Rate Scenarios
Jon Frye

Scrambled Nets for VAR Calculations
Art B Owen and Domingo Tavella

The Value-at-Risk Approach: Proposals on a Generalisation
Michael Schröder

Quadratic Maximum Loss for Risk Measurement of Portfolios
Gerold Studer and Hans-Jakob Lüthi

The Value at Risk of a Portfolio of Currency Derivatives under Worst-Case Distributional Assumptions
Matthew Page and Doug Costa

IV. CORPORATE APPLICATIONS AND FIRMWIDE RISK MANAGEMENT

Introduction
Christopher Hamilton and Bjorn Pettersen

What is VAR?
David Shimko

Handle with Sensitivity
Gregory Hayt and Shang Song

VAR as an Industrial Tool
Chris Turner

VAR for Corporates
David Shimko

Investors' Return on VAR
David Shimko

VARMD=LAR
Richard Singer

Veba's Way with VAR
Andrew Priest

VAR with Muscles
Martin Hiemstra

Not so Simple for Siemens
Andrew Priest

Crossing the Divide Sumit
Paul-Choudhury

Taking it from the Top
Mike Baliman

Together They Stand
Robert Allen

Total Enterprise-wide Risk Management
Christopher Hamilton and Andrew Smith

Index

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  QUOTES

″Provides an excellent overview of VAR techniques.″
Satyajit Das, Finance&Treasury Professional

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  REVIEW

Reviewed by Satyajit Das, Finance and Treasury Association

Value at risk (and its variations) has emerged as the key methodology for quantification of financial risk. It is now increasingly integrated into controls (limits), capital allocation, risk adjusted return, measurement and hedging methodology. VAR - Understanding and Applying Value-at-Risk brings together 40 papers on the main features of VAR techniques. The bulk of the papers has been published before but is supplemented by some new materials and a specially written introductory paper to each of the sections.

VAR techniques - covers the methodology of VAR and its implementation.
Assessing VAR - covers the issues in using VAR including assumption, weaknesses and empirical research into its validity as a measure of risk.
New research - focused on technical aspects of VAR and how to improve various aspects of VAR calculations
Applications - covers a variety of real world situations in which VAR may be useful.

As with any collection, the approach and utility of the individual papers vary. But the collection is overall very strong and provides an excellent overview of VAR techniques. The sections on assessing VAR and applications are particularly good and provide a lot of interest insights and materials for further consideration. An index is provided increasing the value of the book as a reference tool. VAR - Understanding and Applying Value-at-Risk is a very useful collection of available material on this important methodology of risk management.

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  AUTHOR BIOGRAPHY

Author biography unavailable.

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  CONTRIBUTORS

Martin E Titus Jr and Donald Lewis ; Nick Reed ; Charles Smithson with Lyle Minton ; Dan Heron and Richard Irving ; Kenneth Leong ; Cedomir Crnkovic and Jordan Drachman ; Douglas Hoffman and Marta Johnson; Dori Nagar and Richard Singer ; Colin Lawrence and Gary Robinson ; Jacques Longerstaey and Peter Zangari ; Sumit Paul-Choudhury ; Jacob Boudoukh, Matthew Richardson and Robert Whitelaw ; Emanuel Derman ; Mark Garman ; Gary Robinson; Gabriel Bousbib ; Tanya Styblo Beder ; Katerina Simons ; Gregory Hopper ; Darryl Hendricks ; Patricia Jackson, David J Maude and William Perraudin ; Philippe Jorion ; Paul H Kupiec; Andrew Smith ; Julian Shaw ; Thomas Ho, Michael Chen and Fred Eng ; Matt Pritsker ; Chris Marshall and Michael Siegel ; Jon Frye ; Art B Owen and Domingo Tavella ; Michael Schröder ; Gerold Studer and Hans-Jakob Lüthi ; Matthew Page and Doug Costa; Christopher Hamilton and Bjorn Pettersen ; David Shimko ; Gregory Hayt and Shang Song ; Chris Turner ; David Shimko ; Richard Singer ; Andrew Priest ; Martin Hiemstra ; Andrew Priest ; Paul-Choudhury ; Mike Baliman ; Robert Allen ; Christopher Hamilton and Andrew Smith
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