Does the Basle Capital Accord reduce bank fragility? An assessment of the value-at-risk approach

On the performance of the minimum VaR portfolio

“…In principle this violates our assumption of identically distributed standardized realized returns of efficient portfolios, but, practically speaking, the lower bound is seldom if ever achieved and exerts no effect on the analysis. 4 The symbol Φ is reminiscent of the standard normal cdf, but we do not restrict ourselves to this distribution. 5 Similarly relevant is Lemma 1 of Alexander and Baptista (2006).…”

Mean–variance portfolio selection with ‘at-risk’ constraints and discrete distributions

“…3 Hence, the addition of a VaR constraint to this model is motivated by the fact that banks now use VaR in calculating minimum capital requirements associated with their exposures to market risk (see, e.g., Berkowitz and O'Brien, 2002). The addition of a CVaR constraint to the mean-variance model is motivated by the fact that basing bank capital regulation on CVaR is, under certain conditions, more effective than basing it on VaR (see, e.g., Alexander and Baptista, 2006).…”

Risk Measures and Capital Requirements: A Critique of the Solvency II Approach

“…6 Cf. Basak and Shapiro (2001); Alexander and Baptista (2006); Dowd and Blake (2006). 7 Cf., among others, Cuoco and Liu (2006); Leippold et al (2006).…”