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A semi-analytical method for VaR and credit exposure analysis

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Abstract

In this paper, we discuss new analytical methods for computing Value-at-Risk (VaR) and a credit exposure profile. Using a Monte Carlo simulation approach as a benchmark, we find that the analytical methods are more accurate than RiskMetrics delta VaR, and are more efficient than Monte Carlo, for the case of fixed income securities. However the accuracy of the method deteriorates when applied to a portfolio of barrier options.

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Authors and Affiliations

  1. Algorithmics Inc., 185 Spadina Avenue, Toronto, Ontario, M5T 2C6, Canada

    Ben De Prisco, Ian Iscoe & Alexander Kreinin

  2. Citigroup, 250 West Street, New York, NY, 10013, USA

    Ahmed Nagi

Authors
  1. Ben De Prisco
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  2. Ian Iscoe
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  3. Alexander Kreinin
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  4. Ahmed Nagi
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Correspondence to Alexander Kreinin.

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De Prisco, B., Iscoe, I., Kreinin, A. et al. A semi-analytical method for VaR and credit exposure analysis. Ann Oper Res 152, 23–47 (2007). https://doi.org/10.1007/s10479-006-0123-7

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  • DOI: https://doi.org/10.1007/s10479-006-0123-7

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