English, Article edition: THIRD MOMENT OF YIELD PROBABILITY DISTRIBUTIONS FOR INSTRUMENTS ON SLOVENIAN FINANCIAL MARKETS Srečko Devjak; Andraž Grum

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Bookmark: http://trove.nla.gov.au/version/197561
Physical Description
  • article
Language
  • English

Edition details

Title
  • THIRD MOMENT OF YIELD PROBABILITY DISTRIBUTIONS FOR INSTRUMENTS ON SLOVENIAN FINANCIAL MARKETS
Author
  • Srečko Devjak
  • Andraž Grum
Physical Description
  • article
Notes
  • Due to the capital decree legislated by the Bank of Slovenia, Slovenian commercial banks can apply internal models for capital requirements calculation for currency risk and selected market risks (general position risk in line with debt and equity instruments, price change risk for commodities) as an alternative or in combination with standardised methodology. In risk management process banks consider the first and the second moment of a yield probability distribution as portfolio managers seek to achieve the best possible trade-off between risk represented by variance of returns and expected return. In cases when liquidity of instruments on financial markets is low, banks should consider also the third (skewness) and the fourth (kurtosis) moment of a yield probability distribution. All moments define the characteristics of yield probability distribution and therefore affect the risk measure value, being calculated on the basis of yield probability distribution function. The goal of this paper is to calculate the third moment of a yield probability distribution functions for a set of selected assets in financial market in Slovenia and to initiate implementation of a proper risk measure when yield distribution function is not elliptic.
  • yield propability distribution function, value at risk, skewness, risk management, risk aversion, bank
  • RePEc:prg:jnlpep:v:2006:y:2006:i:4:id:293:p:364-373
Language
  • English
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