Value-at-Risk at Commercial Banks Before, During and After Financial Crisis: An International Perspective

2018 ◽  
Author(s):  
Manh Ha Tran ◽  
Dudley Gilder ◽  
Nathan Lael Joseph
Keyword(s):  
At Risk ◽  
Financial Crisis ◽  
Commercial Banks ◽  
Value At Risk ◽  
International Perspective

scholarly journals Bank Value at Risk (VAR) disclosures. A missed leading indicator to the Financial Crisis of 2008?

2020 ◽  
Vol 9 (3) ◽  
pp. 1
Author(s):  
Kiran Parthasarathy
Keyword(s):  
At Risk ◽  
Financial Crisis ◽  
Repeated Measures ◽  
Value At Risk ◽  
Annual Reports ◽  
Us Economy ◽  
Leading Indicator ◽  
Financial Crisis Of 2008 ◽  
Single Number ◽  
Risk Disclosures

The financial crisis of 2008 led to devastating consequences such as bankruptcies and recession in the US economy. Many big banks were at the forefront owing to their risk exposures and open positions. Prior research documents that bank financial statements did not provide adequate lead indicators on the looming crisis in reducing information asymmetry. However, there is no prior research focused on the sufficiency of risk disclosures around this time period. This paper seeks to address this gap using Bank Value at Risk (VAR), a single number publicly disclosed in the annual reports of banks. Bank VAR attempts to quantify the worst possible loss the bank expects to have on its trading portfolios under normal market conditions. Using hand-collected data from the annual reports of the top twelve US banks, this study documents that the change in VAR was steady and positive until the point of the crisis and then decreased in the years thereafter. A repeated-measures analysis of variance model is used to study whether two indicators of VAR (year-to-year change in VAR and log-transformed ratio of VAR to the total trading revenue) differ from pre-crisis to the post-crisis levels. Both VAR indicators reveal an increasing trend pre-crisis and are significantly higher pre-crisis compared to post-crisis. This opens the possibility that the trend of VAR might have information content as a potential leading indicator of the crisis. The finding sheds light on efficacy of risk analysis in ­­bank trading portfolios and could have implications for governance.

How Informative Are Value-at-Risk Disclosures?

2002 ◽  
Vol 77 (4) ◽  
pp. 911-931 ◽  
Author(s):  
Philippe Jorion
Keyword(s):  
At Risk ◽  
Commercial Banks ◽  
Value At Risk ◽  
Financial Risk ◽  
Preliminary Evidence ◽  
Small Sample ◽  
Financial Reports ◽  
Empirical Results ◽  
Dollar Amount ◽  
Risk Disclosures

Value at Risk (VAR), a measure of the dollar amount of potential loss from adverse market moves, has become a standard benchmark for measuring financial risk. Spurred by regulators and competitive pressures, more institutions are reporting VAR numbers in annual and quarterly financial reports. To provide preliminary evidence on the informativeness of these new disclosures, I investigate the relation between the trading VAR disclosed by a small sample of U.S. commercial banks and the subsequent variability of their trading revenues. The empirical results suggest that VAR disclosures are informative in that they predict the variability of trading revenues. Thus, analysts and investors can use VAR disclosures to compare the risk profiles of banks' trading portfolios.

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