Value-at-Risk versus Non-Value-at-Risk Traders

Steinbacher, Matjaz (2009): Value-at-Risk versus Non-Value-at-Risk Traders.

Abstract

In the paper, I simulate the games with a joint presence of 95% VaR-rule and return-rule groups of agents in the game. Simulations highlighted the level of omniscience, next being the rule, which agents follow at the decision-making, and the third the presence of liquidity agents in the game. Omniscient agents make different decisions than non-omniscient agents with non-omniscient return-rule agents performed a little better than the omniscient return-rule agents did, and omniscient VaR-rule agents performed slightly better than non-omniscient VaR-rule agents did. VaR-rule agents clearly outperform return-rule agents, with omniscient return-rule agents performing the worst. The role of liquidity agents has proved to be very significant with none of the two observed performed worst in the neither case.

• Item Type: MPRA Paper
• Language: English
• Keywords: social networks, portfolio decision-making, stochastic finance, Value-at-Risk
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games

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