A Theoretical Development on Market Risk with Fuzzy Logic

Abstract

Risk management involves planning and acting before the risk event. This is proactive rather than reactive management. The process of risk management is designed to reduce or eliminate the different risks of business.

The world is an uncertain place, therefore we need new methods which it’s calculate uncertain (or fuzzy) data in risk management.

In this study, first we define some important concepts, and we brief review of dynamic market risk charge, then we propose a new method for comparative two dynamic market risks with fuzzy distance measure. The most practical of this method with other ones that is when we have uncertain (or fuzzy) data. Finally, some numerical examples illustrate the presented method as well as comparing it with other various ones.