Has the Value at Risk (VaR) market risk measure lost its credibility?

Uploaded on 04/20/2008

VaR is the standard measure for market risk used in discussions between businesses, management and financial regulators. Under Basil II it is the basis for calculating bank capital holdings against potential losses resulting from market shifts. Giving the sharp changes in market volatility since July 2007, has VaR lost credibility as a means of ensuring banks hold adequate capital for their trading positions?