CPBS - Dissertações de Mestrado / Master Dissertations

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Value-at-Risk : empirical evolution and impact on informativeness
Publication . Abrunhosa, Sofia Jerónimo; Cunha, Manuel Ricardo Fontes da
Value-at-Risk (VaR), defined as the maximum expected loss for a certain portfolio at a target timeframe, given a certain confidence level, prevailed as the keystone indicator for market risk in the banking industry. Considering it is a generally accepted indicator among stakeholders, it is crucial to understand whether it provides an adequate level of informativeness. Since the late nineties, it started being integrated in the quarterly and annual reports of banks, being nowadays a mandatory regulatory disclosure. This stated, the relationship between the trading VaR and the subsequent variation in trading revenues of a sample of large banks was investigated. The results suggest that VaR has predictive power over succeeding volatility in trading revenues, presenting satisfactory informativeness for stakeholders. This confirms the investigation with no precedent performed by Jorion (2002), which served as starting point for the current investigation. Moreover, the VaR predictive power increased since the previous study, which provides evidence that the industry accommodated the many empirical evolutions reached in the VaR calculation domain over the past years.
2019-11-27Master thesis Open access Show more