In addition to VaR measurement
, the skewed fat-tailed and extreme value distributions can be used to investigate the effects of model selection on the tails of the severity distributions, excess of loss reinsurance premiums, and total claims distributions.
This likely explains the industry-wide move to VAR measurement
That is, operating units (or traders) with their own profit and loss statements can be evaluated on a risk-adjusted basis with a VaR measurement
. For instance, a company may have a retail sales unit and an importing unit, both of which have volatile earnings.
Market risk-weighted assets, another way banks report how much risk their trading desks are taking on, also rose more at Citi than at Bank of America and JPMorgan in the first quarter, though the jump was not as stark as the difference between their VaR measurements