Dimension Reduction in the Computation of Value‐at‐Risk
CLAUDIO ALBANESE
(Associate professor of mathematics at the University of Toronto in Ontario, Canada)
KEN JACKSON
(Professor of computer science at the University of Toronto in Ontario, Canada)
PETTER WIBERG
(Ph.D. candidate in the department of computer science at the University of Toronto in Ontario, Canada)
195
Abstract
Regulators require banks to employ value‐at‐risk (VaR) to estimate the exposure of their trading portfolios to market risk, in order to establish capital requirements. However, portfolio‐level VaR analysis is a high‐dimensional problem and hence computationally intensive. This article presents two new portfolio‐based approaches to reducing the dimensionality of the VaR analysis.
Citation
ALBANESE, C., JACKSON, K. and WIBERG, P. (2002), "Dimension Reduction in the Computation of Value‐at‐Risk", Journal of Risk Finance, Vol. 3 No. 4, pp. 41-53. https://doi.org/10.1108/eb043499
Publisher
:MCB UP Ltd
Copyright © 2002, MCB UP Limited