VAR is generally accepted methodology for quantifying risks in the global financial industry. A number of financial institutions are increasingly employing value at risk models to manage their portfolio exposed to financial risks involving credit risk and market risk. Even in the regulatory body, the Basle Committee has proposed that such models be used in determination of the capital that banks must hold to back the securities trading. This study examines the empirical performance of different VAR models using data on actual equity portfolio of a life insurance company and how life insurance company applying the models would have fared if the models had been in operation. VAR is statistically useful technique for life insurance company to manage market risk as a part of company-wide risk management system and prospectively applicable for management.
