Measuring and managing market, credit and Op risk [13]

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Bullet points include: Perhaps simplest and most commonly used measure is Value-at-Risk VaR alpha(X), of the portfolio is the outcome (loss), X, that will be exceeded in a fraction alpha of occasions Requires time-scale (T) as well as confidence level (alpha) Natural linkage: the greater the downside risk, the greater (usually) will be the VaR Where the support of the distribution is continuous then Value-at-Risk with confidence level alpha is: Sometimes alpha and 1-alpha interchanged, or losses positive not negative etc.

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