[R-SIG-Finance] Framework for VAR allocation among traders
Brian G. Peterson
brian at braverock.com
Fri Mar 14 12:52:15 CET 2008
On Thursday 13 March 2008 22:32:59 adschai at optonline.net wrote:
> Hi,I'm looking for VAR allocation framework among traders. I saw some
> papers but none of which (at least that I saw) look practical. I am
> wondering if anyone can hint me some idea or some reference? The situation
> is if at the desk level you were given a certain amount of VAR limit, how
> should one allocate the number among traders? THank you.adschai
Calculate Component VaR.
The first definition (as far as I know) is in Garman in Risk Magazine. The
article may be found here:
Garman, Mark, "Taking VaR to Pieces (Component VaR)," RISK 10, 10, October
He also has a longer working paper on the topic here:
We implemented Component VaR for assets with non-normal distribution in our
recent paper here:
Boudt, Kris, Peterson, Brian G. and Croux, Christophe, "Estimation and
Decomposition of Downside Risk for Portfolios With Non-Normal Returns"
(October 31, 2007).
All code for our paper was implemented in R, and is available. We will also
be cleaning up and documenting the functions in the next version of
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