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BOOK DESCRIPTION



When using Value at Risk (VaR) models, created and suited for developed and liquid markets, in developing transition markets practitioners and researchers are often troubled with the same questions:

  • Do the VaR model, developed and tested in the developed and liquid financial markets apply to the volatile and shallow financial markets of transition countries?
  • Do the commonly used VaR models adequately capture the market risk of these markets or do they only give a false sense of security?

This book gives the answers to such questions and represents the first systematic study of risk management issues in transition markets. It gives a cutting-edge overview of VaR estimation techniques and their characteristics and behaviour in volatile transition markets. It provides the reader with a step-by-step approach to VaR estimation, encompassing all the most important issues (regulatory, financial and statistical) required for a real-life implementation.

Besides an in-depth explanation and a practical guide to the procedures needed for a proper implementation of numerous VaR models this book provides a unique empirical analysis of all European transition markets. The analysis investigates and discusses the characteristics of these markets and their implications for risk management. Data, methodology, VaR and volatility forecasting models used in the testing of stock markets are explained in great detail.

The book also presents a new method for calculating VaR in volatile transition markets taking into account the main characteristics of these markets (abrupt changes in the volatility regimes, autoregression, heteroskedasticity, asymmetry and fat tails).

The book is intended for two main audiences. The first group consists of practitioners in risk measurement and management; people developing, testing and using VaR measurements. The second, consists of students of Bachelor, Masters and PhD programmes in the field of quantitative finance, risk measurement and related subject.