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A Comprehensive Review of Value at Risk Methodologies
Year Of Publication: 2013
Month Of Publication: May
Pages: 45
Download Count: 27
View Count: 1151
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 7-24-2013
Publisher: Administrator
Summary
In this article we present a theoretical review of the existing literature on Value at Risk (VaR) specifically focussing on the development of new approaches for its estimation. We will also review the backtesting procedures used to evaluate VaR approach performance. From a practical perspective, empirical literature shows that approaches based on the Extreme Value Theory and the Filtered Historical Simulation are the best methods for forecasting VaR. The Parametric method under skewed and fat-tail distributions also provides promising results especially when the assumption that standardised returns are independent and identically distributed is set aside and when time variations are considered in conditional high-order moments. Lastly, it appears that some asymmetric extensions of the CaViar method provide results that are also promising.
This document is published in Spanish Review of Financial Economics (September 2013).
http://dx.doi.org/10.1016/j.srfe.2013.06.001
Author(s)
Abad, Pilar Sign in to follow this author
Benito, Sonia Sign in to follow this author
Lopes, Carmen Sign in to follow this author
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