The attached presentation discusses Stressed VAR, a practical market risk measure that merges stress testing with VAR, using a familiar and theoretically consistent framework. Stressed VAR contains jump/tail effects using fat-tail Gaussian volatilities, stressed correlations that model turbulent market collective behavior, and a high confidence level. Estimates can be included for liquidity penalties, idiosyncratic risks, and time scales roughly incorporating dynamic trading effects. The presentation includes parameter estimation and application as well as theory.
The presentation also briefly discusses the Volatility of Component VAR.
© 2008 Jan W. Dash. All rights reserved