MRA Volume IV

Volume IV: Value at Risk Models builds on the three previous volumes to provide by far the most comprehensive and detailed treatment of market VaR models that is currently available in any textbook. The exposition starts at an elementary level but, as in all the other volumes, the pedagogical approach accompanied by numerous interactive Excel spreadsheets allows readers to experience the application of parametric linear, historical simulation and Monte Carlo VaR models to increasingly complex portfolios. Starting with simple positions, after a few chapters we apply value-at-risk models to interest rate sensitive portfolios, large international securities portfolios, commodity futures, path dependent options and much else. This rigorous treatment includes many new results and applications to regulatory and economic capital allocation, measurement of VaR model risk and stress testing. Empirical examples and case studies on the CD-ROM include:

  • Parametric linear value at risk (VaR) models: normal, Student t and normal mixture and their expected tail loss (ETL)
  • New formulae for parametric linear VaR based on autocorrelated returns
  • Historical simulation VaR models: how to scale historical VaR and volatility adjusted historical VaR
  • Monte Carlo simulation VaR models based on multivariate normal and Student t distributions, and based on copulas
  • Examples and case studies of numerous applications to interest rate sensitive, equity, commodity and international portfolios
  • Decomposition of systematic VaR of large portfolios into standard alone and marginal VaR components
  • Backtesting and the assessment of risk model risk
  • Hypothetical factor push and historical stress tests, and stress testing based on VaR and ETL.


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ISBN: 9780470997888    432 pages    August 2008