A comparative study for estimating value at risk (VAR) FOR non linear portfolios

Risk is defined as the uncertainty associated with earning and therefore quantification of the risk becomes the first step in risk management in any organization. Bank, as a financial organization, access different kinds of risk viz., credit risk, market risk, operation risk, etc. Market risk in the uncertainty in the bank's earning due to changes in the price of equity, securities, foreign exchange, interest rates, etc. Leading to an adverse impact on the bank's portfolios. Value at risk is used as a risk containment measure, so that the risk reducing actions are triggered when the VaR exceed the predefined level. The purpose of this paper is to compare the different estimation methods on VaR as a market risk measurement of actual bank non-linear portfolios. The aim is to establish the best method given these specific circumstances