Is Value-at-Risk (VaR) a Fair Proxy for Market Risk Under Conditions of Market Leverage?

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dc.contributor.authorLang, Todd M.en
dc.contributor.committeechairWaud, Roger N.en
dc.contributor.committeememberLutton, Thomas J.en
dc.contributor.committeememberLang, William W.en
dc.contributor.departmentEconomicsen
dc.date.accessioned2014-03-14T20:50:33Zen
dc.date.adate2000-12-29en
dc.date.available2014-03-14T20:50:33Zen
dc.date.issued2000-12-14en
dc.date.rdate2001-12-29en
dc.date.sdate2000-12-21en
dc.description.abstractEx-post intraday market-risk extrema are compared with ex-ante standard RiskMetrics parametric Value-at-Risk (VaR) limits for three foreign currency futures markets (British Pound, Japanese Yen, Swiss Frank) to determine whether forecasted volatility of market returns based on settlement price data provides a valid proxy for short-term market risk independent of market leverage. Intraday violations of ex-ante one-day VaR limits at the 95% confidence level should occur for less than 5% of market days. Violation frequencies for each of the markets tested are shown to occur well in excess of this 5% tolerance level: 9.54% for the British Pound, 7.09% for the Japanese Yen, and 7.79% for the Swiss Franc futures markets. Thus, it is empirically demonstrated that VaR is a poor proxy for short-term market risk under conditions of market leverage. Implications for managing (measuring, monitoring, controlling), reporting, and regulating financial market risk are discussed.en
dc.description.degreeMaster of Artsen
dc.identifier.otheretd-12212000-222116en
dc.identifier.sourceurlhttp://scholar.lib.vt.edu/theses/available/etd-12212000-222116/en
dc.identifier.urihttp://hdl.handle.net/10919/36361en
dc.publisherVirginia Techen
dc.relation.haspartetd.pdfen
dc.rightsIn Copyrighten
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/en
dc.subjectCapital Allocation Requirementsen
dc.subjectMarket Risken
dc.subjectLeverageen
dc.subjectValue-at-Risken
dc.subjectVaRen
dc.subjectInternal Models Approachen
dc.titleIs Value-at-Risk (VaR) a Fair Proxy for Market Risk Under Conditions of Market Leverage?en
dc.typeThesisen
thesis.degree.disciplineEconomicsen
thesis.degree.grantorVirginia Polytechnic Institute and State Universityen
thesis.degree.levelmastersen
thesis.degree.nameMaster of Artsen

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