a nice blog on the historical evolution of value at risk
International and European banking supervisors are allowing banks to rely on their own internal Value-at-Risk (VaR) models to calculate their capital requirements. However, many observers who do not belong to the inner circle of financial analysts and commentators are puzzled by the concept. On the one hand, in exactly quantifying a potential loss the methodology seems to offer a sound basis for risk management and financial decisions. On the other hand, critics are numerous and events such as the recent loss of JP Morgan’s “London Whale” raise questions and reinforce distrust.
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