Authors: Babacar Seck; Robert J. Elliott; Jean-Pierre Gueyie
Addresses: Department of Mathematics and Statistics, University of Calgary, 2500 University Drive, NW Calgary, AB T2N 1N4, Canada ' Haskayne School of Business, University of Calgary, 2500 University Drive, NW Calgary, AB T2N 1N4, Canada ' Département de Finance, Université du Quebec à Montréal, 315 rue Sainte-Catherine Est, Local R-3555, Montréal, Québec H2X 3X2, Canada
Abstract: Different approaches to defining dynamic market risk measures are available in the literature. Most are focused or derived from probability theory, economic behaviour or dynamic programming. Here, we propose an approach to define and implement dynamic market risk measures based on recursion and state economy representation. The proposed approach is to be implementable and to inherit properties from static market risk measures.
Keywords: dynamic risk measures; Markov chain; market risks; value-at-risk; conditional VAR; discrete time; recursion; state economy representation; risk management.
International Journal of Financial Engineering and Risk Management, 2014 Vol.1 No.4, pp.334 - 354
Received: 09 Aug 2013
Accepted: 15 Dec 2013
Published online: 31 Oct 2014 *