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Quantile-VaR is the wrong measure to quantify market risk for regulatory purposes

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  • Jaschke, Stefan R.

Abstract

Starting from the objective of banking supervision - to minimize the overall costs of banking to the general public - we show that the current standard of quantifying market risk is flawed. It is perfectly aligned with the interests of banks' shareholders and management, but not with the interests of the general public. This is unsatisfactory from a normative point of view, as significant public resources are used for banking supervision.

Suggested Citation

  • Jaschke, Stefan R., 2001. "Quantile-VaR is the wrong measure to quantify market risk for regulatory purposes," SFB 373 Discussion Papers 2001,55, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:200155
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    File URL: https://www.econstor.eu/bitstream/10419/62690/1/725394684.pdf
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    Cited by:

    1. Lan-chih Ho & John Cadle & Michael Theobald, 2008. "Portfolio selection in an expected shortfall framework during the recent ‘credit crunch’ period," Journal of Asset Management, Palgrave Macmillan, vol. 9(2), pages 121-137, July.
    2. Lan-chih Ho & John Cadle & Michael Theobald, 2011. "An analysis of risk-based asset allocation and portfolio insurance strategies," Review of Quantitative Finance and Accounting, Springer, vol. 36(2), pages 247-267, February.

    More about this item

    Keywords

    VaR; banking regulation; supervision; risk measures; Basel Accord;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • G2 - Financial Economics - - Financial Institutions and Services

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