Raising Value at Risk |
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Authors: | Julia Lynn Wirch PhD |
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Institution: | Department of Statistics and Actuarial Science , University of Waterloo , Waterloo, Ontario, Canada, N2L 3G1 E-mail: jlwirch@barrow.uwaterloo.ca |
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Abstract: | In this paper I consider the properties for a coherent risk measure, outlined by Artzner et al. (1996), and relate these requirements to a well-known measure, value at risk (VaR), which attempts to evaluate economic risk. I show how the usual method of calculating VaR does not adhere to the coherency requirements and discuss the implications of such a result. As well, I discuss the use of the mean excess loss function to help solve this problem. |
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