In this paper the author tests a variety of market VaR models for evaluation of exposure to exchange rate risk, in order to illuminate the advantages and disadvantages of their implementation in the B&H banking sector. As known, B&H monetary policy operates on the basis of
currency board arrangement.
The selection of a particular VaR model is determined with the fact that income generated from taking the risk should always exceed the cost of keeping capital reserves needed to cover taken risks. In the concrete bank three VaR models are applied and comparation of the results is done
