{"id":{"repo_id":"vt","oai_identifier":"oai:vtechworks.lib.vt.edu:10919/36361"},"canonical_url":"https://search.dev.ndltd.org/etd/vt/oai:vtechworks.lib.vt.edu:10919/36361","repository":{"repo_id":"vt","name":"Virginia Tech","base_url":"https://vtechworks.lib.vt.edu/oai/request"},"display":{"title":"Is Value-at-Risk (VaR) a Fair Proxy for Market Risk Under Conditions of Market Leverage?","abstract":"Ex-post intraday market-risk extrema are compared with ex-ante standard RiskMetrics parametric Value-at-Risk (VaR) limits for three foreign currency futures markets (British Pound, Japanese Yen, Swiss Frank) to determine whether forecasted volatility of market returns based on settlement price data provides a valid proxy for short-term market risk independent of market leverage. Intraday violations of ex-ante one-day VaR limits at the 95% confidence level should occur for less than 5% of market days. Violation frequencies for each of the markets tested are shown to occur well in excess of this 5% tolerance level: 9.54% for the British Pound, 7.09% for the Japanese Yen, and 7.79% for the Swiss Franc futures markets. Thus, it is empirically demonstrated that VaR is a poor proxy for short-term market risk under conditions of market leverage. Implications for managing (measuring, monitoring, controlling), reporting, and regulating financial market risk are discussed.","abstract_html":"Ex-post intraday market-risk extrema are compared with ex-ante standard RiskMetrics parametric Value-at-Risk (VaR) limits for three foreign currency futures markets (British Pound, Japanese Yen, Swiss Frank) to determine whether forecasted volatility of market returns based on settlement price data provides a valid proxy for short-term market risk independent of market leverage. Intraday violations of ex-ante one-day VaR limits at the 95% confidence level should occur for less than 5% of market days. Violation frequencies for each of the markets tested are shown to occur well in excess of this 5% tolerance level: 9.54% for the British Pound, 7.09% for the Japanese Yen, and 7.79% for the Swiss Franc futures markets. Thus, it is empirically demonstrated that VaR is a poor proxy for short-term market risk under conditions of market leverage. Implications for managing (measuring, monitoring, controlling), reporting, and regulating financial market risk are discussed.","abstract_has_math":false,"creators":["Lang, Todd M."],"institution":"Virginia Tech","degree_name":"Master of Arts","degree_level":"masters","degree_discipline":"Economics","degree_department":"Economics","school":null,"contributors":[],"advisors":[],"committee_chairs":["Waud, Roger N."],"committee_members":["Lutton, Thomas J.","Lang, William W."],"year":2000,"date_issued":"2000-12-14","date_published":"2000-12-14","updated_at":"2026-07-22T22:19:10Z","subjects":["Capital Allocation Requirements","Market Risk","Leverage","Value-at-Risk","VaR","Internal Models Approach"],"languages":[],"rights":["In Copyright"],"rights_urls":["http://rightsstatements.org/vocab/InC/1.0/"],"identifier_entries":[{"key":"dc:identifier.other","label":"Dc Identifier Other","values":["etd-12212000-222116"],"render_values":[{"text":"etd-12212000-222116","href":null,"code":true}]}]},"links":{"outbound_url":"http://hdl.handle.net/10919/36361","outbound_label":"Handle","outbound_source":"dc:identifier.uri"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor.committeechair","label":"Committee Chair","values":["Waud, Roger N."]},{"key":"dc:contributor.committeemember","label":"Committee Member","values":["Lutton, Thomas J.","Lang, William W."]},{"key":"dc:contributor.department","label":"Department","values":["Economics"]},{"key":"dc:creator","label":"Author","values":["Lang, Todd M."]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date.accessioned","label":"Dc Date Accessioned","values":["2014-03-14T20:50:33Z"]},{"key":"dc:date.available","label":"Dc Date Available","values":["2014-03-14T20:50:33Z","2001-12-29"]},{"key":"dc:date.issued","label":"Date","values":["2000-12-14"]},{"key":"dc:publisher","label":"Institution","values":["Virginia Tech"]},{"key":"dc:type","label":"Dc Type","values":["Thesis"]},{"key":"thesis:degree_discipline","label":"Discipline","values":["Economics"]},{"key":"thesis:degree_level","label":"Degree Level","values":["masters"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Master of Arts"]},{"key":"thesis:institution_name","label":"Thesis Institution Name","values":["Virginia Polytechnic Institute and State University"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["Capital Allocation Requirements","Market Risk","Leverage","Value-at-Risk","VaR","Internal Models Approach"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:rights","label":"Dc Rights","values":["In Copyright"]},{"key":"dc:rights.uri","label":"Rights URI","values":["http://rightsstatements.org/vocab/InC/1.0/"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier.other","label":"Dc Identifier Other","values":["etd-12212000-222116"]},{"key":"dc:identifier.uri","label":"Identifier URI","values":["http://hdl.handle.net/10919/36361"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["Ex-post intraday market-risk extrema are compared with ex-ante standard RiskMetrics parametric Value-at-Risk (VaR) limits for three foreign currency futures markets (British Pound, Japanese Yen, Swiss Frank) to determine whether forecasted volatility of market returns based on settlement price data provides a valid proxy for short-term market risk independent of market leverage. Intraday violations of ex-ante one-day VaR limits at the 95% confidence level should occur for less than 5% of market days. Violation frequencies for each of the markets tested are shown to occur well in excess of this 5% tolerance level: 9.54% for the British Pound, 7.09% for the Japanese Yen, and 7.79% for the Swiss Franc futures markets. Thus, it is empirically demonstrated that VaR is a poor proxy for short-term market risk under conditions of market leverage. Implications for managing (measuring, monitoring, controlling), reporting, and regulating financial market risk are discussed."]},{"key":"dc:description.degree","label":"Dc Description Degree","values":["Master of Arts"]},{"key":"dc:title","label":"Title","values":["Is Value-at-Risk (VaR) a Fair Proxy for Market Risk Under Conditions of Market Leverage?"]}]}],"canonical_facts":{"dc:contributor.committeechair":["Waud, Roger N."],"dc:contributor.committeemember":["Lutton, Thomas J.","Lang, William W."],"dc:contributor.department":["Economics"],"dc:creator":["Lang, Todd M."],"dc:date.accessioned":["2014-03-14T20:50:33Z"],"dc:date.available":["2014-03-14T20:50:33Z","2001-12-29"],"dc:date.issued":["2000-12-14"],"dc:description.abstract":["Ex-post intraday market-risk extrema are compared with ex-ante standard RiskMetrics parametric Value-at-Risk (VaR) limits for three foreign currency futures markets (British Pound, Japanese Yen, Swiss Frank) to determine whether forecasted volatility of market returns based on settlement price data provides a valid proxy for short-term market risk independent of market leverage. Intraday violations of ex-ante one-day VaR limits at the 95% confidence level should occur for less than 5% of market days. Violation frequencies for each of the markets tested are shown to occur well in excess of this 5% tolerance level: 9.54% for the British Pound, 7.09% for the Japanese Yen, and 7.79% for the Swiss Franc futures markets. Thus, it is empirically demonstrated that VaR is a poor proxy for short-term market risk under conditions of market leverage. 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