Rolling window VaR: an EVT approach
Rolling window VaR: an EVT approach
Author(s): Andrei RusuSubject(s): International relations/trade, Policy, planning, forecast and speculation, Financial Markets, ICT Information and Communications Technologies
Published by: Alma Mater & Universitatea »Babes Bolyai« Cluj - Facultatea de St. Economice si Gestiunea Afacerilor
Keywords: Value-at-risk; APARCH; Generalized Pareto Distribution; Back testing;
Summary/Abstract: In this study, a method of estimating value-at-risk is proposed. This method combines elements of extreme value theory (EVT), the APARCH model (Ding et al. 1993) and the rolling window method. The research was conducted using 20 stock market indexes worldwide during 2006-2019. Value-at-risk was estimated via 12 competing models which were evaluated using 5 tests. The back testing results indicate that the best model was the one which takes into consideration the asymmetric character of financial data (APARCH with skewed normal distribution), the Generalized Pareto Distribution for modeling the tail of the financial returns distribution and the rolling window approach. The methodologies discussed in this paper could provide a useful tool for both financial entities and regulatory authorities.
Journal: Review of Economic Studies and Research Virgil Madgearu
- Issue Year: XIII/2020
- Issue No: 2
- Page Range: 137-158
- Page Count: 22
- Language: English
- Content File-PDF