Measuring Market Risk in Norwegian Financial Institutions

Abstract

This article discusses two methods for analysing market risk in the Norwegian banking sector and in life insurance companies. The two methods, Value at Risk (VaR) and stress tests, are commonly used in individual institutions, but have been adjusted here for use on the available aggregate statistical data from the banking and insurance sector. The methods have to be simplified for use on these aggregate data, but the analyses nevertheless provide an indication of the vulnerability of the institutions viewed as a whole. Our analyses show that the market risk of commercial and savings banks, viewed in relation to total assets, is low. The market risk of life insurance companies is higher, but has fallen in recent years.