Type

Working Paper

Authors

John Cotter

Subjects

Business

Topics
g10 garch filter econometric models value at risk extreme value theory risk econometric models conditional risk

Varying the VaR for unconditional and conditional environments (2004)

Abstract Accurate forecasting of risk is the key to successful risk management techniques.Using the largest stock index futures from twelve European bourses, this paperpresents VaR measures based on their unconditional and conditional distributions for single and multi-period settings. These measures underpinned by extreme valuetheory are statistically robust explicitly allowing for fat-tailed densities. Conditional tail estimates are obtained by adjusting the unconditional extreme value procedure with GARCH filtered returns. The conditional modelling results in iid returnsallowing for the use of a simple and efficient multi-period extreme value scaling law.The paper examines the properties of these distinct conditional and unconditional trading models. The paper finds that the biases inherent in unconditional single and multi-period estimates assuming normality extend to the conditional setting.
Collections Ireland -> University College Dublin -> School of Business
Ireland -> University College Dublin -> Centre for Financial Markets Working Papers
Ireland -> University College Dublin -> College of Business

Full list of authors on original publication

John Cotter

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John Cotter
University College Dublin
Total Publications: 93