iCreate: Managing Risk in Banks - Contextualising the ‘VaR Coherency’ Dimension

VaR is a statistical method to measure the financial risk either firm wide or at a financial instrument level. The statistical significance of the results produced using VaR and its application to take business decisions is a much debated topic. In several occasions this is accepted as the “new science of risk management”. VaR is (in general) considered to be an incoherent measure of risk, simply because it does not support the rule of sub-additivity. To be a coherent risk measure, the