ERM-102-12: Value-at-Risk: Evolution, Deficiencies, and Alternatives


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Reading Source: ERM-102-12 Study Note

Topics Covered in this Reading:

  • VaR’s Shortcomings
    • Shortcoming #1: Coherency, Subadditivity and Tail Risk
    • Shortcoming #2: Normal Distribution
    • Shortcoming #3: Methodology - Bricolage and Distribution of Risk
    • Shortcoming #4: Historical Data and Observation Period
    • Shortcoming #5: Agency Problems
    • Shortcoming #6: Regulatory Disclosure
  • Alternatives to VaR
    • Expected Shortfall (ES)
    • Conditional VaR (CVaR)
    • Modified VaR (mVaR)
    • CoVaR
  • Complementary Tools
    • Stressed VaR
  • The Unquantifiable Side of Risk Management

ERM-102-12: Value at Risk: Evolution, Deficiencies, and Alternatives