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BUVAR - a VaR approach for countercyclical capital buffer
We propose a countercyclical risk measure, BuVaR, the estimated shortfall of a financial institution removed of the effects of procyclicality. It involves inflating one side of the return distribution of an asset by a scaling factor called bubble that depends on the location of the present state in the boom-bust cycle. BuVaR is countercyclical (it leads crashes), distinguishes between long and short positions (is asymmetrical) and provides an additional buffer for fat-tails by recognizing that crashes can only happen in one direction.
Bubble-value-at-risk.com ~
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