Financial Risk Measurement for Financial Risk Management Essay

41696 Words Jun 15th, 2013 167 Pages
NBER WORKING PAPER SERIES

FINANCIAL RISK MEASUREMENT FOR FINANCIAL RISK MANAGEMENT Torben G. Andersen Tim Bollerslev Peter F. Christoffersen Francis X. Diebold Working Paper 18084 http://www.nber.org/papers/w18084 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 May 2012

Forthcoming in Handbook of the Economics of Finance, Volume 2, North Holland, an imprint of Elsevier. For helpful comments we thank Hal Cole and Dongho Song. For research support, Andersen, Bollerslev and Diebold thank the National Science Foundation (U.S.), and Christoffersen thanks the Social Sciences and Humanities Research Council (Canada). We appreciate support from CREATES funded by the Danish National Science Foundation. The
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Hence we stress powerful yet parsimonious models that are easily estimated. In addition, we emphasize the need for deeper understanding of the links between market risk and macroeconomic fundamentals, focusing primarily on links among equity return volatilities, real growth, and real growth volatilities. Throughout, we strive not only to deepen our scientific understanding of market risk, but also cross-fertilize the academic and practitioner communities, promoting improved market risk measurement technologies that draw on the best of both. Torben G. Andersen Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 and NBER t-andersen@kellogg.northwestern.edu Tim Bollerslev Department of Economics Duke University Box 90097 Durham, NC 27708-0097 and NBER boller@econ.duke.edu Peter F. Christoffersen Professor of Finance Rotman School of Management University of Toronto 105 St. George Street 447 Toronto, ON, M5S 3E6, Canada peter.christoffersen@rotman.utoronto.ca Francis X. Diebold Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104-6297 and NBER fdiebold@sas.upenn.edu

Contents
1 Introduction 1.1 Six Emergent Themes . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Conditional Risk Measures . . . . . . . . . . . . . . . . . .

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