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Applying Hybrid Approach to Calculating VaR in Croatia
Company: Proceedings of the International Conference of the Faculty of Economics in Sarajevo: From Transition to Sustainable Development: The Path to European Integration
Year Of Publication: 2006
Month Of Publication: July
Pages: 21
Download Count: 711
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Comment Num: 0
Language: EN
Who Can Read: Free
Date: 7-4-2007
Publisher: Administrator
In this paper the author examines the theoretical background of two nonparametricapproaches to calculating VaR, historical simulation and hybrid approach developed byBoudoukh, Richardson and Whitelaw, and examines their performance in a transitional capitalmarket such as Republic of Croatia. The paper evaluates and analyses the out-of-sampleforecasting accuracy of both methods on two Croatian indexes, CROBEX – the official index ofZagreb Stock Exchange and VIN - the official index of Varazdin Stock Exchange. In section 2 ofthe paper, an overview of Value at Risk as a methodology for measuring market risk ispresented. Section 3, present the methodology of calculating VaR via historical simulation. Insection 4, a hybrid nonparametric approach to calculating VaR is presented and its advantagesand disadvantages are discussed. Section 5 analyses the characteristics of Croatian financialmarket. In section 6, out-of-the-sample performance evaluation of historical simulation andhybrid BRW approach, with different observation windows and decay factors is performed ontwo Croatian stock indexes.
Zikovic, Sasa Sign in to follow this author
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