Risk measure

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Financial institutions, such as banks or insurance companies are required to hold cash reserves as a cushion against default. A Risk measure is used to determine the amount of cash that is required to make the risk acceptable to the regulator.

Contents 1 Examples 2 Mathematically 3 Related pages 4 Further reading

[edit] Examples

Well-known examples are Value at risk, Expected shortfall. In recent years the attention has turned towards coherent measures of risk.

[edit] Mathematically

A risk measure is defined as a mapping from a set of random variables to the real numbers. This set of random variables represents the risk at hand. The common notation for a risk measure associated with a random variable X is ρ[X].

[edit] Related pages

• RiskMetrics

[edit] Further reading

• Crouhy, Michel; D. Galai, and R. Mark (2001). Risk Management. McGraw-Hill, 752 pages. ISBN 0-07-135731-9. 
• Kevin, Dowd (2005). Measuring Market Risk, 2nd, John Wiley & Sons, 410 pages. ISBN 0-470-01303-6.