Extreme Value Theory and Value-at-Risk: Relative Performance in Emerging Markets

Topics:
Investment and Capital Markets
Tags:
Business Operations,
Theory,
Research & Development,
Performance Management,
Performance,
Modeling,
Marketing Research,
Marketing,
IIF,
Human Resources,
...
Source:
IIF

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Overview: This paper investigates the relative performance of Value-at-Risk (VaR) models with the daily stock market returns of nine different emerging markets. In addition to well-known modeling approaches, such as variance-covariance method and historical simulation, the paper studies the extreme value theory (EVT) to generate VaR estimates and provide the tail forecasts of daily returns at the 0.999 percentile along with 95% confidence intervals for stress testing purposes. The results indicate that EVT based VaR estimates are more accurate at higher quantiles.

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Format: PDF | Size: 300KB | Date: Jun 2004 | Pages: 17

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