Optimising the value-at-risk model in banks in India to adequately quantify market risks in emerging markets Online publication date: Fri, 24-Jan-2020
by Fakhraddin Akhmedov; Mhd Shaker Zeitoun
International Journal of Economic Policy in Emerging Economies (IJEPEE), Vol. 12, No. 4, 2019
Abstract: Market risk tends to be extreme in its development and violent in its impact. This study gives consideration to the case study of banks in India in optimising the value-at-risk (VaR) model in emerging markets believing that the case study of these banks is not just the story of individual banks but a window into the structural issues of the entire market risk models in emerging markets. This study uses the parametric method to optimise the value-at-risk model based on probabilities and mathematical expectations to adequately quantify the expected worst-case loss that a financial institution may sustain under normal market conditions, at a predefined confidence level, over a given time horizon and for a given asset portfolio after taking into consideration the expected recovery rate of assets. The recommendations set out in this study provide emerging markets with an optimised estimation of the value-at-risk model to adequately quantify market risk.
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