Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Derivatives
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Derivatives

The Journal of Derivatives

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter
Primary Article

Second Generation VaR and Risk-Adjusted Return on Capital

Don R Rich
The Journal of Derivatives Summer 2003, 10 (4) 51-61; DOI: https://doi.org/10.3905/jod.2003.319205
Don R Rich
An associate professor at Northeastern University and a senior consultant at State Street Associates.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: d.rich@neu.edu
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Abstract

Within a period of only a few years, value at risk has become probably the single most widely used measure of financial risk exposure. Yet, by focusing only on the probability of experiencing a loss of a given size at the VaR horizon, it tacitly assumes that a large loss occurring prior to the horizon will be ignored. But this is unrealistic. A firm that monitors its financial position frequently and sees that it has penetrated the VaR level before the horizon is reached will very likely take action to reduce risk exposure, even though in many cases, a recovery would occur such that the loss would not exceed the VaR level by the time the horizon was reached. In this article, Rich shows that the traditional VaR calculation substantially understates the risk that a loss of a given size will occur at some point during the specified VaR horizon, and he offers a set of formulas for computing the relevant “continuous value at risk.” The article also explores related applications of the continuously monitored VaR barrier, including discretely monitored VaR barriers, RAROC using continuous VaR, and modifications for inflation-adjusted VaR and VaR evaluated relative to a benchmark portfolio.

  • © 2003 Pageant Media Ltd

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Derivatives
Vol. 10, Issue 4
Summer 2003
  • Table of Contents
  • Index by author
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Derivatives.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Second Generation VaR and Risk-Adjusted Return on Capital
(Your Name) has sent you a message from The Journal of Derivatives
(Your Name) thought you would like to see the The Journal of Derivatives web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Second Generation VaR and Risk-Adjusted Return on Capital
Don R Rich
The Journal of Derivatives May 2003, 10 (4) 51-61; DOI: 10.3905/jod.2003.319205

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Second Generation VaR and Risk-Adjusted Return on Capital
Don R Rich
The Journal of Derivatives May 2003, 10 (4) 51-61; DOI: 10.3905/jod.2003.319205
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
  • Info & Metrics
  • PDF

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar

More in this TOC Section

  • The Subprime Credit Crisis of 2007
  • The Determinants of CDS Bid-Ask Spreads
  • Variance Reduction for Multivariate Monte Carlo Simulation
Show more Primary Article
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 1074-1240 | E-ISSN: 2168-8524

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies