[R-SIG-Finance] Framework for VAR allocation among traders
Joe W. Byers
ecjbosu at aol.com
Sat Mar 15 13:19:20 CET 2008
Brian G. Peterson wrote:
> 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:
Riskmetrics is also a good resource for this
The first two publications with the second having component var. Note
riskmetrics and jorion's definitions of component var differ.
> 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
> - Brian
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