Risk measure

Risk measure

Financial institutions, such as banks or insurance companies are required to hold cash reserves as a cushion against default. A Risk measure is used to determine the amount of cash that is required to make the risk acceptable to the regulator.

Examples

Well-known examples are Value at risk, Expected shortfall. In recent years the attention has turned towards coherent measures of risk.

Mathematically

A risk measure is defined as a mapping from a set of random variables to the real numbers. This set of random variables represents the risk at hand. The common notation for a risk measure associated with a random variable X is ho [X] .

Related pages

*RiskMetrics

Further reading

*cite book
last = Crouhy
authorlink =
first = Michel
coauthors = D. Galai, and R. Mark
title = Risk Management
publisher = McGraw-Hill
date = 2001
location =
pages = 752 pages
url =
doi =
id = ISBN 0-07-135731-9

*cite book
last = Kevin
first = Dowd
authorlink =
coauthors =
title = Measuring Market Risk
edition = 2nd
publisher = John Wiley & Sons
date = 2005
location =
pages = 410 pages
url =
doi =
id = ISBN 0-470-01303-6


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