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Limitations Of Value-At-Risk (Var) For Budget Analysis

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  • Gustafson, Cole R.

Abstract

Value-at-risk (VaR) is increasingly being applied to problems in agriculture, especially valuation of crop insurance and agricultural lending risk exposure. VaR conveys the probability that losses exceeding a threshold will likely occur within a specified timeframe. However, it does not provide the expected value of losses, should they happen. When determining risk exposure for budget analysis, this latter amount is of keen interest. Expected tail loss (ETL) methods are developed and compared with VaR.

Suggested Citation

  • Gustafson, Cole R., 2004. "Limitations Of Value-At-Risk (Var) For Budget Analysis," Agribusiness & Applied Economics Report 23612, North Dakota State University, Department of Agribusiness and Applied Economics.
    • Handle: RePEc:ags:nddaae:23612
    DOI: 10.22004/ag.econ.23612
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    Keywords

    Agricultural Finance; Risk and Uncertainty;

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