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| Author: | Locarek-Junge, H. Prinzler, R. Strassberger, M. |
| Title: | The estimation of market risk in portfolios of stocks and stock options |
| Journal: | Schmalenbach Business Review
2002 : 1, p. 171-190 |
| Index terms: | MARKETS RISK RISK ANALYSIS STOCKS FINANCING |
| Language: | eng |
| Abstract: | Market risk can be described as potential losses in portfolio value caused by price changes in the investor's portfolio. Value-at-Risk (VaR) quantifies a loss bound that cannot be exceeded with a specified probability at a given time horizon, i.e., a quantile of the portfolio's loss distribution. The authors cannot determine this distribution of portfolio losses analytically for portfolios with nonlinear loss functions - especially those portfolios that include options - even if the distribution of risk factors is multivariate-normal. In such cases it is common practice to use extensive approximations and simulations under partly restrictive assumptions. To avoid such reductions, this paper uses approaches based on artificial neural networks (ANN). |
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