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Market Risk [18]

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Bullet points include: Uses parametric distributions for VaR modelling. Fit to time series data. Calculate quantiles of fitted distributions. In practice, commonest approach that is actually used for trading book problems is simplified version of GARCH(1,1) model, popularised by JP Morgan in their RiskMetrics methodology. Similar methods used in practice (but usually more ‘factor’ based) for equity risk models for asset managers

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