Vasil Rumenov Lyaskov
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Exposure-based volatility: an application in corporate risk management
Athanasios P. Fassas , Vasil Rumenov Lyaskov doi: http://dx.doi.org/10.21511/imfi.13(2-1).2016.10Investment Management and Financial Innovations Volume 13, 2016 Issue #2 (cont. 1) pp. 235-245
Views: 973 Downloads: 239 TO CITEThis study develops a non-traditional measure of risk, an exposure-based volatility, for the non-financial company and applies this measure to capture both the downside potential of cash-flows and the probability of requiring additional external financing under most foreseeable conditions. The empirical analysis is applied on a particular Bulgarian transport company and concludes that the proposed measure of exposure-based volatility manages to capture effectively the peaks and troughs in the variance of cash-flows, thus, significantly outperforming the historical standard deviation. This non-traditional downside risk estimate is by itself extremely useful as it contains significant information about a given company. Furthermore, it can be used as a valuable input in several risk management tools; in the current paper, a robust measure of CFaR and an original interpretation of Merton’s credit risk model are presented
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