Value-at-risk and conditional Value-at-risk estimation: A comparative study of risk performance for selected Malaysian sectoral indices

Abstract

Value-at-risk (VaR) has taken an important place in risk management since its acceptance as the main risk metric by Basel Committee on Banking Supervision (BCBS). Recently, BCBS announced the emphasis of implementing Conditional VaR (CVaR) in market risk assessment. While VaR measures the maximum loss in a given confidence level and period, CVaR gauges the amount of loss that exceed VaR in a given confidence level. Measuring industry risk is one of the crucial tasks for banks and other investors in order to manage their risks. This paper analyzes VaR and CVaR in the context of Malaysian industries. We compare industries with a selected benchmark. The results show that Technology has the highest risk and Consumer Product has the lowest risk.