Alois Paul Knobloch

Value at Risk: Tool for Managing Trading Risks*

This article surveys the appropriateness of Value at Risk as a tool for managing trading portfolios. We introduce various calculation methods and give a synopsis of their pros and cons with respect to accuracy, implementational aspects as well as suitability for resource allocation and optimization. We contribute to existing approaches for capital allocation and provide an optimization model. Finally, we demonstrate shortcomings of Value at Risk as a measure of risk. The focus is on compatibility with decision theory and its relation to coherent measures of risk. Thereby, we discuss alternatives to Value at Risk such as Lower Partial Moment One or tail conditional expectation. We give some reasons to prefer the latter as an alternative to Value at Risk and suggest that under certain conditions the tail conditional expectation is compatible with second order stochastic dominance.

Eine modifizierte Verbindlichkeiten-Bilanzierung nach dem Fair-Value-Modell für den IFRS- und den HGB-Abschluss

ZusammenfassungIFRS- und HGB-Abschluss zeigen Informationsdefizite bei der Schuldenbewertung zum Bilanzstichtag, speziell im Unternehmensvergleich. Ausdruck hierfür ist unter anderem ein Sinken des Buchwertes der Verbindlichkeiten bei einer Bonitätsverschlechterung. Ein modifizierter Ansatz zur Bilanzierung verzinslicher Verbindlichkeiten wird vorgestellt, der eine Bewertung auf Basis stichtagsbezogener Marktverhältnisse ermöglicht und die Informationsnachteile vermeidet. Die neue Bilanzierung besitzt eine wesentlich höhere Aussagekraft, was den Vergleich der zukünftigen finanziellen Belastung aus der Verbindlichkeitenfinanzierung zwischen Unternehmungen unterschiedlicher Bonität anbelangt. Darüber hinaus wird der Ansatz auch für eine dem Vorsichtsprinzip verpflichtete Bilanzierung, also für eine handelsrechtliche Anwendung, formuliert.SummaryIFRS and German GAAP reveal some informational shortcomings in accounting for liabilities. For example, a liability’s fair value decreases as the rate of return on the remaining cash flow increases due to a higher credit spread. A modified approach of accounting for interest bearing liabilities is presented incorporating the positive impacts of a valuation based on actual data as of the balance sheet date while avoiding the informational deficiencies of the current “fair valuation”. At the same time, the modified approach allows for a deeper analysis of the future financial impacts of the liabilities presented in the balance sheet. With regard to this, the liability values between enterprises differing in their credit related market conditions will become comparable. The approach is also adapted to the German GAAP.

Value at Rist: Regulatory and Other Applications, Methods, and Criticism

This article surveys several applicational as well as theoretical aspects of Value at Risk as a measure of risk. First, we compare different calculation methods with respect to accuracy, implementational issues as well as suitability for resource allocation and optimization. We contribute to capital allocation based on Value at Risk and provide an optimization model. Afterwards, we concentrate on shortcomings of Value at Risk as a measure of risk from a theoretical point of view. The focus is on the relation to decision theory and to coherent measures of risk. Alternatives to Value at Risk such as the lower partial moment one or the tail conditional expectation are included. We give some reasons to prefer the latter as a measure of risk.

Strukturierte Anleihen und Bilanzrechtsauslegung

SummaryWith respect to German accounting standards it is still a critical issue whether to account for hybrid financial instruments as one item or to separate the embedded derivative. The proposals that deal with this problem by adopting, more or less, IAS 39 are not in accordance with the objectives of these standards. We develop criteria within the German GAAP on how to account for these instruments in general, and show how this affects the accounting for specific types. We elaborate on what characterizes an inseparable item and draw the conclusion that the embedded derivative should not be separated mostly. Recognizing an instrument as one item rather than as two or more items results in smaller differences in equity compared to IAS 39 for subsequent periods. The issue is of interest when both accounting frameworks are used: one for financial statements of the group, the other for financial statements of the legal entities.