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2010 | 20 | 1 | 132-143
Article title

Estimation of Value at Risk: extreme value and and robust approaches

Selected contents from this journal
Title variants
Languages of publication
EN
Abstracts
EN
The large portfolios of traded assets held by many financial institutions have made the measurement of market risk a necessity. In practice, VaR measures are computed for several holding periods and confidence levels. A key issue in implementing VaR and related risk measures is to obtain accurate estimates for the tails of the conditional profit and loss distribution at the relevant horizons. VaR forecasts can be heavily affected by a few influential points, especially when long forecast horizons are considered. Robustness can be enhanced by fitting a generalized Pareto distribution to the tails of the distribution of the residual and sampling tail residuals from this density. However, to ensure a sufficiently large breakdown point for the estimator of the generalized Pareto tails, robust estimation is needed (see Dell’Aquila, Ronnchetti, 2006). The aim of the paper is to compare selected approaches to computing Value at Risk. We consider classical and robust conditional (GARCH) and unconditional (EVT) semi-nonparametric models where tail events are modeled using the generalized Pareto distribution. We wish to answer the question of whether the robust semi-nonparametric procedure generates more accurate VaRs than the classical approach does.
Year
Volume
20
Issue
1
Pages
132-143
Physical description
Contributors
  • Department of Demography and Business Statistics, Karol Adamiecki University of Economics, ul. Bogucicka 14, 40-226 Katowice, Poland, trzpiot@ae.katowice.pl
  • Department of Demography and Business Statistics, Karol Adamiecki University of Economics, ul. Bogucicka 14, 40-226 Katowice, Poland, justyna.majewska@ae.katowice.pl
References
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Document Type
Publication order reference
Identifiers
YADDA identifier
bwmeta1.element.desklight-468fce2d-efab-4d9e-87d0-45224078fd64
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