Computational Tools for the Analysis of Market Risk

  • Authors:

  • Alberto Suárez;Santiago Carrillo

  • Affiliations:

  • RiskLab Madrid and ETS de Informática, Universidad Autónoma de Madrid, Ciudad Universitaria de Cantoblanco, LE-28049 Madrid, Spain, E-mail: alberto.suarez@ii.uam.es;RiskLab Madrid and Mathematics Department, Universidad Autónoma de Madrid, Ciudad Universitaria de Cantoblanco, LE-28049 Madrid, Spain, E-mail: santiago.carrillo@uam.es

  • Venue:
  • Computational Economics
  • Year:
  • 2003

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Abstract

The estimation and management of risk is an important and complex task faced by market regulators and financial institutions. Accurate and reliable quantitative measures of risk are needed to minimize undesirable effects on a given portfolio fromlarge fluctuations in market conditions. To accomplish this, a series of computational tools has beendesigned, implemented, and incorporated into MatRisk, an integratedenvironment for risk assessment developed in MATLAB. Besides standard measures, such as Value at Risk(VaR), the application includes other more sophisticated risk measures that address the inability of VaRproperly to characterize the structure of risk. Conditionalrisk measures can also be estimated for autoregressive models with heteroskedasticity, including some novel mixture models. These tools are illustrated with a comprehensive risk analysis of the Spanish IBEX35 stock index.