Measuring Fuzzy Risk by Credibilistic Value at Risk

Abstract

The value at risk (VaR) methodology is a widely used tool in financial market risk management. In this paper, we present a new method for fuzzy risk analysis. First, we present the new concept of the credibilistic value at risk based on credibility theory. Then, we examine some properties of the proposed credibilistic value at risk. Finally, a kind of fuzzy simulation algorithm is given to show how to calculate the credibilistic value at risk. The proposed credibilistic VaR is suitable for use in many real problems of fuzzy risk analysis.