Author(s)

Debasish Majumder

Reserve Bank of India, Kolkata, India.

The conventional judgement-based method for fixing the risk tolerance level in the Value-at-Risk (VaR) model might be a suboptimal method, because the procedure induces the possibility of bias in risk measurement. Conversely, a superior risk management practice might be one, where input parameters are determined by a quantitative process which is “non-subjective to the risk modeller’s preferences”. Based on this insight, we have improved on the VaR model. Our model allows time variation of the risk tolerance level and so is suitable for scenario-wise risk analysis.

Value-at-Risk, Extreme Value Theory, Generalised Pareto Distribution, Tail-Related Risk Models

Majumder, D. (2018) Value-at-Risk Based on Time-Varying Risk Tolerance Level. Theoretical Economics Letters, 8, 111-118. doi: 10.4236/tel.2018.81007.