Autori
Peccati, Lorenzo
Kast, Robert
Luciano, Elisa

Titolo
Value-at-risk as a decision criterion
Periodico
International Center for Economics Research, Torino. ICER - Working papers series
Anno: 1999 - Fascicolo: 8 - Pagina iniziale: 1 - Pagina finale: 29

Value at Risk (Var) is fruithfully used for monitoring risk and indentifying its main sources, in view of an accurate resource allocation. Also, it is increasingly adopted for synthetic, powerful reporting, as well as for performance evaluation. However, a recurrent and much more ambitious aim, creeping in the Var literature, is the following: use VaR not only for assessing portfolio risk, but also for managing it. This paper addresses the question from the methodological point of view: we discuss both choice criteria which use VaR only and ranking which use VaR and other indicators of the return distribution function, such as moments and certainty equivalents. In particular, we discuss the relationship between the ranking produced by VaR and some dominance criteria; furthermore, we construct a mean-VaR efficient frontier, analogous to the mean-variance one, without the assuption of normality of returns. We compare mean variance and mean-VaR efficiency for the stable case.



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