Template-type: ReDIF-Paper 1.0
Author-Name: Juan-Ángel Jiménez-Martín
Author-Email: juanangel@ccee.ucm.es
Author-Homepage: https://www.ucm.es/fundamentos-analisis-economico2/jajm
Author-Person: pji27 
Author-Workplace-Name: Departamento de Economía Cuantitativa (Department of Quantitative Economics), Facultad de Ciencias Económicas y Empresariales 
	(Faculty of Economics and Business), Universidad Complutense de Madrid
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2
Author-Workplace-Homepage: https://www.ucm.es/icae
Author-Name: Michael McAleer
Author-Workplace-Name: Department of Applied Economics, National Chung Hsing University, Taiwan
Author-Name: Teodosio Pérez-Amaral
Author-Workplace-Name: Dpto. de Fundamentos de Análisis Económico II, Universidad Complutense
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2
Author-Workplace-Homepage: https://www.ucm.es/icae
Title: What Happened to Risk Management During the 2008-09 Financial Crisis?
Abstract: When dealing with market risk under the Basel II Accord, variation pays in the form of lower
	capital requirements and higher profits. Typically, GARCH type models are chosen to
	forecast Value-at-Risk (VaR) using a single risk model. In this paper we illustrate two useful
	variations to the standard mechanism for choosing forecasts, namely: (i) combining different
	forecast models for each period, such as a daily model that forecasts the supremum or infinum
	value for the VaR; (ii) alternatively, select a single model to forecast VaR, and then modify
	the daily forecast, depending on the recent history of violations under the Basel II Accord. We
	illustrate these points using the Standard and Poor’s 500 Composite Index. In many cases we
	find significant decreases in the capital requirements, while incurring a number of violations
	that stays within the Basel II Accord limits.
Classification-JEL: G32, G11, G17, C53, C22.
Keywords:Risk management, Violations, Aggressive risk strategy, Conservative risk strategy, Value-at-risk forecasts.
Length: 13 pages
Creation-Date: 2009
Number: 2009-19
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae0919.txt
File-URL: https://eprints.ucm.es/id/eprint/9435/1/0919.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:0919