Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/138730
33 Visitors
34 Hits
0 Downloads
- Title
- On Bayesian value at risk : from linear to non-linear portfolios
- Related
- Asia-Pacific financial markets, Vol. 11, Issue 2, (2004), p.161-184
- DOI
- 10.1007/s10690-006-9008-7
- Publisher
- Springer
- Date
- 2004
- FoR/RFCD Code(s)
-
150200 Banking, Finance and Investment
- Author/Creator
- Siu, Tak Kuen
- Author/Creator
- Tong, Howell
- Author/Creator
- Yang, Hailiang
- Description
- This paper proposes the use of Bayesian approach to implement Value at Risk (VaR) model for both linear and non-linear portfolios. The Bayesian approach provides risk traders with the flexibility of adjusting their VaR models according to their subjective views. First, we deal with the case of linear portfolios. By imposing the conjugate-prior assumptions, a closed-form expression for the Bayesian VaR is obtained. The Bayesian VaR model can also be adjusted in order to deal with the ageing effect of the past data. By adopting Gerber-Shiu's option-pricing model, our Bayesian VaR model can also be applied to deal with non-linear portfolios of derivatives. We obtain an exact formula for the Bayesian VaR in the case of a single European call option. We adopt the method of back-testing to compare the non-adjusted and adjusted Bayesian VaR models with their corresponding classical counterparts in both linear and non-linear cases.
- Description
- 24 page(s)
- Subject Keyword
- 150200 Banking, Finance and Investment
- Subject Keyword
- subjective VaR
- Subject Keyword
- Bayesian method
- Subject Keyword
- Gerber-Shiu's model
- Subject Keyword
- leptokurtic effect
- Subject Keyword
- non-linear portfolios
- Subject Keyword
- model risk
- Resource Type
- journal article
- Organisation
- Macquarie University. Dept. of Actuarial Studies
- Identifier
- http://hdl.handle.net/1959.14/138730
- Identifier
- ISSN:1387-2834
- Identifier
- mq-rm-2009000353
- Language
- eng
- Reviewed
