Subject The article shows the possibility and the need for a new approach to the VaR calculation based on the analysis of existing techniques and criteria for risk assessment, identification of urgent challenging issues of the VaR method, being one of the most used and quantitatively supported classical methods for risk assessment. Objectives The aim of the study is to offer a new method for VaR calculation on the basis of real volatility principles. Methods The study rests on the theory of correlation functions. Results The research enables to assess the cost of risk, which corresponds to real changes in the portfolio value within a certain time interval. It also contributes to developing the technique for portfolio risk optimization. Conclusions and Relevance There is a possibility and the need for a new approach to VaR calculation on the basis of real volatility principles. Most Russian companies and financial institutions should put it into practice as an efficient tool for operational risk management and a factor promoting the convergence of the national legal framework for risk management with accepted international standards.
Keywords: Value at Risk, VaR, concept, volatility, correlation function
References:
Blank I.A. Upravlenie finansovymi riskami [Financial risk management]. Moscow, Dashkov i K Publ., 2010, 311 p.
Vorob'ev S.N., Baldin K.V. Upravlenie riskami v predprinimatel'stve [Risk management in business]. Moscow, Dashkov i K Publ., 2010, 772 p.
Krasil'nikov A.E. Izmerenie riskov v krupnykh kompaniyakh: metodologicheskie voprosy [Risk measurement in large companies: methodological issues]. Problemy teorii i praktiki upravleniya = Theoretical and Practical Aspects of Management, 2010, no. 2, pp. 6–44.
Rogov M.A. Vybor metodologii izmereniya rynochnykh riskov. Value-at-Risk (VaR) dlya otsenki valyutnykh riskov v banke [Choosing a methodology to measure market risks. Value-at-Risk (VaR) for foreign exchange risk assessment in banks]. Upravlenie finansovymi riskami = Financial Risk Management, 2005, no. 3, pp. 15–18.
Struchenkova T.V. Ispol'zovanie metodiki VaR dlya otsenki bankovskikh riskov [Applying the VaR method to assess banking risks]. Bankovskoe delo = Banking, 2000, no. 5, pp. 2–7.
Sultanova L.V. Vozmozhnosti ispol'zovaniya algoritma VaR v risk-menedzhmente kommercheskogo banka [Possibilities of using the VaR algorithm in the risk management of a commercial bank]. Finansy Kazakhstana = Finance of Kazakhstan, 2005, no. 1, pp. 30–33.
Vyatkin V.N., Gamza V.A., Ekaterinoslavskii Yu.Yu., Hampton J.J. Upravlenie riskami v rynochnoi ekonomike [Risk management in the market economy]. Moscow, Ekonomika Publ., 2005, 305 p.
Chekulaev M.V. Risk-menedzhment: upravlenie finansovymi riskami na osnove analiza volatil'nosti [Risk management: managing the financial risks on the basis of the volatility analysis]. Moscow, Al'pina Pablisher Publ., 2002, 344 p.
Andersson F., Mausser H., Rosen D., Uryasev S. Credit risk optimization with conditional Value-at-Risk criterion. Mathematical Programming. Ser. B, 2001, no. 89, pp. 273–291.
Jabr R.A. Robust self-scheduling under price uncertainty using conditional value-at-risk. IEEF Transactions on Power Systems, 2005, no. 20, pp. 1852–1858.
Krokhmal P., Palmquist J., Uryasev S. Portfolio optimization with conditional Value-at-Risk objective and constraints. The Journal of Risk, 2002, vol. 4, no. 2, pp. 11–27.
Rockafellar, Uryasev S. Optimization of conditional Value-at-Risk. The Journal of Risk, 2000, vol. 2, no. 3, pp. 21–41.
