Value-at-Risk Based Risk Management: Optimal Policies and Asset Prices
This paper analyzes optimal, dynamic portfolio and wealth/consumption policies of utility maximizing investors who must also manage market-risk exposure using a given risk-management model. We focus on the industry standard, the Value-at-Risk (VaR) based risk management, and find that VaR risk managers often optimally choose a larger exposure to risky assets than non risk managers, and consequently incur larger losses, when losses occur. (...)
Financial theory ; Management of financial services: stock exchange and bank management science (including saving banks) ; Individual Working Papers, Preprints ; No country specification