Article 1

From: Krassimir
Affiliation:
Address: kkostadinov@gmx.de
Date: 18 Feb 2008
Time: 04:01:09

Comments

There is a big difference between risk management and accounting. If you take the accounting statements of two banks, you will be able to a large extend just to compare the figures. According to the general opionion on this forum (there were such discussions in the past), it is not possible to compare two VaR numbers unless you have very similar portfolios over the same horizon, run the same models with the same parameters on the same systems. Therefore, from the point of view of the investors or of the general management, the VaR figures are something technical, more or less a part of the internal IT infrastructure of the bank, and as such can hardly be used as a basis for taking business decisions. Therefore it's a lost battle. Some attempts to overcome this situation have been done. One could try to simplify and standartize the risk measures ala-Basel2. The regulators then press the banks to take business decisions (determine regulatory capital) based on these figures. However, the simplifications are from an economical point of view often rubbish, and numerous flows of the standarts chosen in b2 can be found.

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