Volatility Modelling in Market Risk Analysis
Volatility Modelling in Market Risk Analysis
Author(s): Andrea KADEROVÁ, Zuzana Krátka, Michal PálešSubject(s): Economy, National Economy, Business Economy / Management, Financial Markets
Published by: Reprograph
Keywords: market risk; volatility; Value at Risk; historical simulation method; EWMA model; GARCH model; Monte Carlo simulation;
Summary/Abstract: Volatility is an important parameter for market risk management and it is applied in many issues such as portfolio optimization or VaR methodology. The forecasting of volatility can be considered as a problem of financial modelling. In this paper, we calculate one of the most used instruments for measuring market risk - value at risk (VaR) and we estimate the volatility use different approaches, then we apply the GARCH model and the EWMA model in the same stock data of CAC 40. The EWMA model and the GARCH model is time variation in risk. The share index CAC 40 is the most common index of Paris market and it reflects efficiency of 40 greatest shares listed companies on French stock exchange, which are measured by market capitalization of companies tradable on free market and liquidity. The fluctuation of CAC 40 index correlates with trends of whole market closely.
Journal: Journal of Applied Economic Sciences (JAES)
- Issue Year: XIII/2018
- Issue No: 57
- Page Range: 787-796
- Page Count: 10
- Language: English