A Lucid Retrospective of The Application of Value at Risk in Market Risk Measurement and Management

Abstract

The potential for financial detriment arising from market price fluctuations, a phenomenon intensified by the complexity of contemporary financial markets, has necessitated the promulgation of sophisticated risk management techniques. Foremost among these is Value at Risk (VaR). This paper presents an examination of the VaR concept, its diverse methodological approaches, and its integration within the comprehensive framework of market risk management. Through an evaluation of VaR’s efficacy and limitations, this study elucidates its practical utility in diverse financial institutions and proffers insights into the evolving landscape of risk management.