it as a market risk measure are revealed. 9 ) var has proved unreliable as a measure of risk over long time periods or under abnormal market conditions. the danger posed by exceptional market shocks such as the 2007 – 08 financial crisis or the ltcm crisis in the world markets in 1998 – shocks that are often accompanied by a drying up of market liquidity – can be captured only by means of supplemental methodologies. the potential of var to exacerbate market volatility has also been acknowledged. the herd mentality that is so typical of the financial industry means that market sensitive risk management systems, such as var, actually make markets less stable and more prone to crisis. this is because financial institutions may have to sell assets in the affected classes when markets become volatile in order to keep within the var limits set by senior management ; this depresses market prices even further and increases the volatility and correlation of the risk factors for these assets. this in turn might cause another set of financial institutions to exceed their var limits, forcing them to reduce their exposure by selling still more of the same assets – perpetuating a vicious cycle. 10 ) thus the var measure works well as a risk measure only for markets operating under normal conditions and only over a short period, such as one trading day. potentially, it ’ s a very poor and misleading measure of risk in abnormal markets, over longer time periods, or for illiquid portfolios. also, var, like all risk measures, depends for its integrity on a robust control environment. in many instances of rogue - trading cases, hundreds of millions of dollars of losses have been suffered by trading desks that had orders not to assume var exposures of more than a few million dollars. the reason for the discrepancy is reportedly due to trading desks finding some way of circumventing trading controls and suppressing risk measures. for example, a trader might falsify transaction details entered into the trade reporting systems, by using fictitious trades to balance out the risk of real trades, or by tampering with the inputs to risk models, such as volatility estimates that determine the valuation and risk estimation for an options portfolio. as you would agree, opportunity to carry out such tasks is facilitated by inadequate management oversight arising from lack of appreciation of the importance of the internal controls in trading environment. further, there were instances reported in recent years about management deliberately turning a blind eye to risk measures or to the apprehension of the risk

##ation and liberalised gold policy. the evolution of the gold control policy since independence was centered around some major objectives, viz., weaning away people from gold, regulating the supply of gold, reducing the domestic demand and prices and curbing smuggling. in the wake of the chinese war, it was felt in some circles that it would be feasible to make a frontal attack on demand for gold in india. accordingly, the gold control order 1962 was issued, banning the making and selling of jewellery above 14 carats, making it compulsory for gold smiths to be licensed and submit accounts of all gold received and utilised by them etc., the measures met with lot of resistance and criticism. this coupled with administrative complexities resulted in the failure of the gold control order. bullion imports and exports were also banned but restrictions on import of gold into the country resulted in the flourishing of smuggling and unofficial transactions in foreign exchange. official imports to discourage smuggling was first mooted in 1977 but viewed against the forex reserves available then, it was thought as an impossible proposition. the government decided to sell confiscated gold in small quantities through the rbi. however, it did not have any major impact on smuggling. various schemes for mobilisation of idle gold holdings have been implemented by the government and rbi in the past, but with little success. the 15 - year gold bonds at 6 1 / 2 per cent ( november 1962 ) could mobilise only 16. 70 tonnes. a second attempt to garner gold was made through the 7 per cent gold bond 1980 scheme ( march 1965 ) which could mobilise only 6. 1 tonnes. the third series designated as national defence gold bonds 1980 ( 1965 ) garnered 13. 7 tonnes and the gold bond scheme 1993 garnered 41 tonnes of gold. even after two years of launching the scheme under the recent gold deposit scheme ( 1997 ) the mobilization is around seven tonnes only. thus, attempts to mobilise gold under various schemes have not evoked the desired response. currently, gold import is permitted through three official channels viz., special import licences, nonresident indians and authorized banks and institutions. import of gold through special import licence ( sil ) has been negligible after gold import through banks was permitted. it is but natural that nri route had become less attractive after the banks have been permitted to import gold. the liberalized gold policy has certainly brought to the official sector what originally was an unofficial sector. without doubt, it has eliminated