Implied correlation from VaR
Risk Management
2011-03-30 v1 Statistical Finance
Abstract
Value at risk (VaR) is a risk measure that has been widely implemented by financial institutions. This paper measures the correlation among asset price changes implied from VaR calculation. Empirical results using US and UK equity indexes show that implied correlation is not constant but tends to be higher for events in the left tails (crashes) than in the right tails (booms).
Cite
@article{arxiv.1103.5655,
title = {Implied correlation from VaR},
author = {John Cotter and François Longin},
journal= {arXiv preprint arXiv:1103.5655},
year = {2011}
}