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The Value at Risk Models in Times of Financial Crisis: Case Study of an Irish Equity Portfolio

Mavani, Mohini Purshottam (2020) The Value at Risk Models in Times of Financial Crisis: Case Study of an Irish Equity Portfolio. Masters thesis, Dublin, National College of Ireland.

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Abstract

Value at Risk (VaR) is a risk measurement technique, that measures the risk associated with a portfolio at a given level of confidence for a certain time frame. It refers to maximum loss to a certain degree of confidence. It is widely accepted risk management tool and the use of the same has been made mandatory by the ‘Basel Committee of Banking Supervision’. The aim of the Value at Risk is to measure the risk associated with a portfolio so as to enable investors about the risk associated to their investment.

The research therefore was conducted to investigate which VaR model Variance Covariance, Historical Simulation and Monte Carlo Simulation would best suit for an investor investing in an Irish equity portfolio. To ensure the validity of the models three back testing methods z, Kupiec and Christoffersen tests were implemented. The time frame constituted 11 years which include the Global Financial Crisis of 2008.

A model would be deemed best only if it could adopt to the changing market environment. The results however concluded that known of the models out of the three survived in extreme volatile period, although performed reasonable well during normal market scenario.

Keywords: Variance Covariance, Historical Simulation and Monte Carlo Simulation, Back Testing, Equity Portfolio.

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HC Economic History and Conditions > Economic Recession
H Social Sciences > HG Finance > Investment
Divisions: School of Business > Master of Science in Finance
Depositing User: Dan English
Date Deposited: 16 Feb 2021 09:49
Last Modified: 16 Feb 2021 09:49
URI: http://norma.ncirl.ie/id/eprint/4764

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