The increase in volatility of financial variables in recent years imposed great risks on the business of financial institutions. Value at Risk(VAR) has gained rapid acceptance as a valuable approach for measuring market risk. The Basle Committee has proposed that VAR models be used in determination of the capital that banks must hold to back the securities trading.
There are some methods for VAR estimation like delta analysis method, historical simulation method, Monte-Carlo simulation. But all VARs are not equal and financial institutions may be too dependent on one single VAR estimate, so it is important to evaluate the accuracy of the underlying VAR model. This study examines the accuracy of the beta VAR model which eases the process of reaching a VAR measure against the other models. This study also deal with the necessity of the bank-wide risk management system and the risk management of financial institutions using VAR models.
