Olkhov, Victor (2021): To VaR, or Not to VaR, That is the Question.
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Abstract
We consider the core problems of the conventional valueatrisk (VaR) based on the price probability determined by frequencies of trades at a price p during an averaging time interval Δ. To protect investors from risks of market price change, VaR should use price probability determined by the market trade timeseries. To match the market stochasticity we introduce the new marketbased price probability measure entirely determined by probabilities of random market timeseries of the trade value and volume. The distinctions between the marketbased and frequencybased price probabilities result different assessments of VaR and thus can cause excess losses. Predictions of the marketbased price probability at horizon T equals the forecasts of the market trade value and volume probability measures.
Item Type:  MPRA Paper 

Original Title:  To VaR, or Not to VaR, That is the Question 
English Title:  To VaR, or Not to VaR, That is the Question 
Language:  English 
Keywords:  valueatrisk; risk measure; price probability; market trades 
Subjects:  C  Mathematical and Quantitative Methods > C0  General > C02  Mathematical Methods D  Microeconomics > D4  Market Structure, Pricing, and Design > D46  Value Theory D  Microeconomics > D8  Information, Knowledge, and Uncertainty > D81  Criteria for DecisionMaking under Risk and Uncertainty G  Financial Economics > G1  General Financial Markets G  Financial Economics > G1  General Financial Markets > G11  Portfolio Choice ; Investment Decisions G  Financial Economics > G1  General Financial Markets > G12  Asset Pricing ; Trading Volume ; Bond Interest Rates G  Financial Economics > G1  General Financial Markets > G17  Financial Forecasting and Simulation 
Item ID:  110344 
Depositing User:  Victor Olkhov 
Date Deposited:  01 Nov 2021 03:24 
Last Modified:  01 Nov 2021 03:24 
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Jour. of Derivatives, 1(1),7184 DOI: https://doi.org/10.3905/jod.1993.407868 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/110344 
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To VaR, or Not to VaR, That is the Question. (deposited 25 Jan 2021 02:51)
 To VaR, or Not to VaR, That is the Question. (deposited 01 Nov 2021 03:24) [Currently Displayed]