Work

Value at Risk For Derivatives

Year: 1999

Type: article

Abstract: Value at Risk (VaR) techniques are di cult to apply when portfolios contain signi cant exposures to `non-linear ' derivative claims such as options. This paper analyses the biases introduced by standard delta and delta-gamma VaR methods for options. These methods employ local approximations and adopt very strong assumptions about the Gaussianity of returns on derivatives. Making extensive use of characteristic functions, we develop a new method based on multivariate square root processes which avoids the assumption of Gaussian returns. JEL Nos.: G11, G21, L51.

Source: The Journal of Derivatives

DOI: 10.3905/jod.1999.319116

Authors: Lina El-Jahel, William Perraudin, Peter Sellin

Institutions: Birkbeck, University of London, Bank of England, Swedish National Bank

Language: English

Topic: Financial Risk and Volatility Modeling

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2046899013

FWCI: 8.255

Cites: 22

Cited by: 44

Related to: 10