Open AccessTrading book risk metrics: A South African perspective
Author(s) -
Gary Wayne van Vuuren,
Dirk Visser
Publication year - 2016
Publication title -
suid-afrikaanse tydskrif vir ekonomiese en bestuurswetenskappe/south african journal of economic and management sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.277
H-Index - 17
eISSN - 2222-3436
pISSN - 1015-8812
DOI - 10.4102/sajems.v19i1.1316
Subject(s) - credibility , value at risk , economics , market risk , financial economics , metric (unit) , perspective (graphical) , risk management , country risk , capital market , value (mathematics) , econometrics , macroeconomics , finance , political science , computer science , statistics , operations management , mathematics , law , artificial intelligence
The regulatory market risk metric – Value at Risk – has remained virtually unchanged since its introduction by JP Morgan in 1996. Many prominent examples of market risk underestimation have undermined the credibility of VaR, prompting the search for better, more robust measures. Expected shortfall and procyclical capital buffers have been proposed by regulatory authorities, but neither is without problems. Bubble VaR – a coherent measure which avoids many of the pitfalls to which other measures have succumbed – was designed to be both forward-looking and countercyclical. Although tested on other markets, here it is applied to various South African prices and the results compared with both international observations and other market risk measures. Bubble VaR is found to perform consistently and reliably under all market conditions