Market risk measurement: preliminary lessons from the COVID-19 crisis

Lazar, E. ORCID: https://orcid.org/0000-0002-8761-0754 and Zhang, N. (2020) Market risk measurement: preliminary lessons from the COVID-19 crisis. In: Billio, M. and Varotto, S. ORCID: https://orcid.org/0000-0001-5328-5327 (eds.) A New World Post COVID-19 Lessons for Business, the Finance Industry and Policy Makers. Innovation in Business, Economics & Finance 1. Edizioni Ca'Foscari, pp. 97-107. ISBN 9788869694424 doi: 10.30687/978-88-6969-442-4/007

Abstract/Summary

This chapter presents a preliminary analysis on how some market risk measures dramatically increased during the COVID-19 pandemic, with measures computed over longer horizons experiencing more pronounced effects. We provide examples when regulatory market risk measurement proved to be suboptimal, overestimating risk. A further issue was the large number of Value-at-Risk ‘exceptions’ during the first few months of the crisis, which normally leads to overinflated bank capital requirements. The current regulatory framework should address these problems by suggesting improvements to the calculation of risk measures and/or by modifying the rules which determine capital requirements to make them appropriate and realistic in crisis situations.

Item Type	Book or Report Section
URI	https://centaur.reading.ac.uk/id/eprint/92097
Identification Number/DOI	10.30687/978-88-6969-442-4/007
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Edizioni Ca'Foscari
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