Risk Capital Attribution and Risk-Adjusted Performance Measurement

Crouhy, Michel; Galai, Dan; Mark, Robert

doi:10.1016/b978-012088438-4.50020-4

Cited by 72 publications

(90 citation statements)

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“…Vientisumo rizika -informacijos apdorojimo (technologijø) rizika -procese naudojamos informacinës technologijos neveikia, kaip tikëtasi, arba neuþtikrina duomenø gavimo laiku, patikimumo, saugumo [8]. Klastotės ir neteisėti veiksmai padaro žalą organizacijos reputacijai arba procesas neužtikrina svarbaus finansinio, intelektinio arba fizinio turto saugumo, neapsaugo nuo neteisingo ar neteisėto šio turto naudojimo.…”

Section: Verslo Rizikos Valdymo Tobulinimasunclassified

Verslo rizikos valdymas ir jo tobulinimas

Kaleininkaitė

Trumpaitė

2007

Business: Theory and Practice

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Santrauka. Verslo rizikos valdymas įmonių veikloje yra labai svarbus procesas, suteikiantis pranašumą, siekiant dirbti efektyviau ir norint išlikti konkurencinėje kovoje, užtikrinantis palankius veiklos rezultatus. Tačiau Lietuvos įmonėse rizikos valdymas -vis dar didelė problema. Lietuvoje visuose ekonomikos sektoriuose susiduriama su daugeliu verslo rizikos rūšių, tačiau jos valdomos nepakankamai. Verslo rizikai valdyti straipsnyje siūloma praktiškai naudoti tikimybinius skirstinius, leidžiančius prognozuoti finansinius įmonės veiklos rezultatus, o verslo rizikos valdymui tobulinti siūlomas integruotas rizikos valdymo modelis, kuris atspindi šių dienų sparčiai besikeičiančią ekonomiką bei ekonomikos subjektų poreikį minimaliomis sąnaudomis užtikrinti neriboto skaičiaus rizikos rūšių valdymą.Reikšminiai žodžiai: verslo rizika, verslo rizikos valdymas, neapibrėžtumas, prognozavimas, tikimybinis skirstinys, rizikos valdymo modelis. Abstract. Business risk management is a very important process in any company. It helps to gain advantage over competitors and to work more effectively. Still, in Lithuanian companies risk management is quite a big problem. In Lithuania we face many different kinds of risk in all sectors of economy, but these risks are not suitably managed. In this article we propose to practically use probability distributions for the business risk management, allowing to forecast the future financial results of a company, and for the improvement of business risk management we present integrated risk management model, which reflects nowadays changing economy and the need to ensure the management of different risks at the minimal cost. BUSINESS RISK MANAGEMENT AND ITS IMPROVEMENTKeywords: business risk, business risk management, uncertainty, forecasting, probability distribution, risk management model. ĮvadasRinkos ekonomikos sąlygomis dirbančių įmonių veikla yra labai dinamiška, todėl neišvengiamai sietina su rizika. Kintant aplinkai, verslui būdingas neapibrėžtumas, prognozuojamų rezultatų neužtikrintumas, rizikingi sprendimai. Todėl, keičiantis rinkos sąlygoms bei intensyvėjant konkurencijai, išauga poreikis valdyti riziką. Menka rizikos valdymo patirtis dinamiškoje konkurencinėje rinkoje lemia nepakankamai pagrįstus sprendimus ir gali daryti neigiamą įtaką įmonių veiklos rezultatyvumui. Todėl rizikos valdymas Lietuvos verslininkams tampa ypač aktualus, siekiant ne tik išlikti, bet ir sėkmingai veikti dinamiškoje rinkoje.Lietuvoje rizikos įvertinimas, prognozavimas bei valdymas -kol kas per mažai dėmesio sulaukiantis ekonomi-

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Section: Verslo Rizikos Valdymo Tobulinimasunclassified

Verslo rizikos valdymas ir jo tobulinimas

Kaleininkaitė

Trumpaitė

2007

Business: Theory and Practice

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“…Such a behaviour corresponds to the standard profit maximization 9 See also Szegö (2002). 10 See, e.g., Crouhy et al (2001). 11 See Pflug (2000) on the coherence of VaR and CVaR.…”

Section: Motivationmentioning

confidence: 99%

The hidden risks of optimizing bond portfolios under VAR

Winker¹,

Maringer²

2007

JOR

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. • Unfortunately, VaR also has some severe drawbacks. Apart from several undesired theoretical properties, VaR comes with two major downsides when applied in practice: reliable estimations are difficult to perform, and using it as a relevant constraint on a portfolio's risk causes massive computational problems. In this paper, we find that for bond portfolios these two problems can be solved by estimating with (highly reliable) empirical distributions and applying heuristic optimization methods. In fact, the optimization approach is flexible enough that it can easily cope with practical aspects such as integer constraints and lot sizes for different assets, the number of different assets in the portfolio etc. Terms of use: Documents in• However, we also find that solving these two problems gives rise to a new, third one: In portfolios optimised under the empirical distribution, the actual probability and magnitude of shortfalls exceed their nominal level to a large extent. This effect occurs even with small portfolios and generously high shortfall probabilities, and it becomes even worse the more assets the portfolio contains and the lower the shortfall probabilities.• As this effect of generating hidden risks emerges unnoticed by the optimisation process, we conclude from our results that VaR together with non-parametric distributions is an inadequate measure of risk when used as the relevant constraint on a portfolio's risk in optimization. AbstractValue at risk (VaR) has become a standard measure of portfolio risk over the last decade. It even became one of the corner stones in the Basel II accord about banks' equity requirements. Nevertheless, the practical application of the VaR concept suffers from two problems: how to estimate VaR and how to optimize a portfolio for a given level of VaR? For the first problem, several approaches have been suggested including the historical simulation method. The optimization problem can be tackled using recent advances in heuristic optimization algorithms. However, our application to bond portfolios shows that a solution to the two aforementioned problems gives rise to a third one: the actual VaR of bond portfolios optimized under a VaR constraint might exceed its nominal level to a large extent. Thus, optimizing bond portfolios under a VaR constraint might increase risk. This finding is of relevance not only for investors, but even more so for bank regulation authorities.JEL: C15, C16, G11, G28

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“…Some of these measures include RORAC (return on risk-adjusted capital), ROCAR (return on capital at risk) and RAROA (risk-adjusted return on risk-adjusted assets). See Crouhy et al (2006).…”

Section: Relative Performance Measurementmentioning

confidence: 99%

Basel Committee on Banking Supervision

Peihani¹

2016

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Risk Capital Attribution and Risk-Adjusted Performance Measurement

Cited by 72 publications

References 1 publication

Verslo rizikos valdymas ir jo tobulinimas

Verslo rizikos valdymas ir jo tobulinimas

The hidden risks of optimizing bond portfolios under VAR

Basel Committee on Banking Supervision

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