A New Risk Measure MMVaR: Properties and Empirical Research

The paper presents the properties of an alternative method, which measures market risk over time-horizon exceeding one day: Mark to market value at risk (MMVaR). Relying on the minimal returns during the time interval, this method not only considers the non-normality of data and information about sample size, but also meets the requirement of increasing the minimal capital ratio in Basel III, basically. The authors theoretically prove the translation invariance, monotonicity and subadditivity of MMVaR as a risk measure under some conditions, and study its finite sample properties through Monte Carlo simulations. The empirical analysis shows that MMVaR can measure multi-period risk accurately.