The Best of Two Worlds—Combining Conditional Volatility Models with Extreme Value Theory to Calculate Value at Risk
(2012) NEKH01 20112Department of Economics
- Abstract
- We compare Value at Risk estimates from an AR(1)-GARCH(1,1) model with t- or normally distributed innovations, to estimates from an AR(1)-GARCH(1,1) model where the Peak-Over-Threshold method is applied to the tails of the innovations. Using the Christoffersen backtest, we find that the performance of the second type of model is superior to the first, particularly at high confidence levels for the VaR estimate.
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/2295998
- author
- Kjellson, Benjamin LU and Koskinen Rosemarin, Simon LU
- supervisor
-
- Hans Byström LU
- organization
- course
- NEKH01 20112
- year
- 2012
- type
- M2 - Bachelor Degree
- subject
- keywords
- Value At Risk, Extreme Value Theory, Conditional Heteroskedasticity, Backtesting
- language
- English
- id
- 2295998
- date added to LUP
- 2012-02-13 13:20:39
- date last changed
- 2012-02-13 13:20:39
@misc{2295998, abstract = {{We compare Value at Risk estimates from an AR(1)-GARCH(1,1) model with t- or normally distributed innovations, to estimates from an AR(1)-GARCH(1,1) model where the Peak-Over-Threshold method is applied to the tails of the innovations. Using the Christoffersen backtest, we find that the performance of the second type of model is superior to the first, particularly at high confidence levels for the VaR estimate.}}, author = {{Kjellson, Benjamin and Koskinen Rosemarin, Simon}}, language = {{eng}}, note = {{Student Paper}}, title = {{The Best of Two Worlds—Combining Conditional Volatility Models with Extreme Value Theory to Calculate Value at Risk}}, year = {{2012}}, }