Enterprise Risk Management Slides

Risk measures [12]

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$Bullet points include: Capital = Assets – Liabilities. Capital may be defined by reference to book values (e.g. initial acquisition costs, or amortised cost). But more commonly nowadays market value based. If financial institution holds (market-value) capital equal to VaR(alpha) where latter is calculated for holding period T then it should default on a fraction alpha of occasions over a horizon of T. Ignoring any profits / losses and/or access to new capital in the meantime. VaR vs TVaR in part about who bears losses beyond default, see later$

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