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Volume :6 Issue : 2 1999      Add To Cart                                                                    Download

Measuring Value at Risk in Equity Positions

Auther : Imad A. Mossa
Nabeel E. Al-Loughani

This paper deals with value at risk (VAR), which is a new and popular approach to risk management. The paper describes the concept and illustrates its practical significance. Three approaches to measuring VAR are discussed: the parametric, the historical and the simulation approaches. The parametric and historical approaches are then used to calculate the VARs of portfolios consisting of shares listed on the Kuwait Stock Exchange. The results turn out to be highly sensitive with respect to the underlying assumptions. Since empirical testing reveals that the rates of return are not normally distributed, we tend to give more credibility to the VAR estimates obtained by using the historical approach.

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