ABSTRACT
Value at Risk (VaR) has become a popular risk measure of nan-cial risk. It is also used for regulatory capital requirement purposes in banking and insurance sectors. VaR methodology has been developed mainly for banks to control their short-term market risk. Although, the VaR is already widespread in nancial industry, this method has not yet become a standard tool in pension funds. However, like other nancial institutions, pension funds recognize the importance of measuring their nancial risks. e aim of this chapter is to specify conditions under which VaR could be a good measure of long-term market risk. A er a description of a general VaR algorithm and the three main VaR methods, we present di erent aspects of market risk in banks and pension funds. erefore, we propose necessary adaptations of VaR measures for pension funds business speci cations.
