2002•Journal of Wuhan Automotive Polytechnic UniversityRequires access

A New Method to Measure and Control Financial Risk

Chulin Li

Abstract

VaR(Value at Risk), popular in the developed countries in recent years, is introduced to measure and control financial risk. The concept and function of VaR are explained and its defects are pointed out. A newly developed concept CVaR(Conditional Value at Risk) is also introduced. The advantages of CVaR are described and compared with VaR. Application of CVaR in the optimization of stock mix is presented.

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Key concepts: CVAR, Measure (data warehouse), Expected shortfall, Risk measure, Coherent risk measure, Value at risk, Dynamic risk measure, Econometrics