Value At Risk And Risk Management

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Value at Risk Framework or VAR framework is mainly used for financial risk management or financial mathematics in measuring the risk element on a definite portfolio of financial assets, present in any economic organization. This particular portfolio comprises of time event and probability, which states the threshold of the risk loss value over the period of time. These risk loss values are assumed to be according to the market to market pricing, no trading and normal market which contributes in this risk valued portfolio. The risk management of Value at Risk is done by risk managers which are responsible for measuring and controlling the risk levels that are present in an organization. Considering the modern portfolio theory, the third constituent of portfolio is amount of investment which then creates a mean-variance framework risk. This framework risk is defined in terms of possible variation in the expected portfolio which will describe the risk value loss in financial assets of an economic organization.
The Value at Risk framework and management help an organization in analyzing the risk loss in the financial resources, which increase its use in many businesses, organizations and institutions. (Hassan, 2009) The organization use this VAR framework in analyzing the potential losses in many risk management ideas which include stress testing, backtesting, expected shortfall, tail conditional expectation and economic capital. These are the few important ideas that have been
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