VAR exceptions reflect volatile season
Investment banks reported increased numbers of high trading losses in the third quarter of this year, highlighting the volatility in the financial markets and casting doubt on their risk modelling.
Several banks reported significantly higher numbers of value-at-risk (VAR) exceptions - days on which trading losses exceeded the maximum loss expected at a certain probability level, typically either 95% or 99%. The VAR used for comparison was derived from the previous day's portfolio positions.
Lehman
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