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VaR methods for linear instruments

Vidarsson, Birgir (2008) In LUTVDG/TVBB5268SE
Risk Management and Safety Engineering
Division of Fire Safety Engineering
Division of Risk Management and Societal Safety
Abstract
In this thesis various Value-at-Risk models are compared and evaluated towards finding the optimal model for the bank's trading book. The focus is on linear instruments (stocks, indicies and currency) and real market data, both domestic and foreign, is used for the calculations. I find that the GARCH(1,1) based model outperforms other models in volatility estimation and should thus be a wise choice when volatility estimation is needed, but GARCH based methods become rather complex for a multivariate covariance estimation. Therefore a mixture of simpler models such as EWMA is needed for making rational estimates.
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author
Vidarsson, Birgir
supervisor
organization
year
type
H2 - Master's Degree (Two Years)
subject
keywords
VaR, Covariance, GARCH, EWMA, Market risk, Financial science, Financial time series, Volatility, Finansiering, Technological sciences, Teknik
publication/series
LUTVDG/TVBB5268SE
report number
5268
ISSN
1402-3504
language
English
id
1315258
date added to LUP
2009-02-12
date last changed
2016-02-04 03:59:04
@misc{1315258,
  abstract     = {In this thesis various Value-at-Risk models are compared and evaluated towards finding the optimal model for the bank's trading book. The focus is on linear instruments (stocks, indicies and currency) and real market data, both domestic and foreign, is used for the calculations. I find that the GARCH(1,1) based model outperforms other models in volatility estimation and should thus be a wise choice when volatility estimation is needed, but GARCH based methods become rather complex for a multivariate covariance estimation. Therefore a mixture of simpler models such as EWMA is needed for making rational estimates.},
  author       = {Vidarsson, Birgir},
  issn         = {1402-3504},
  keyword      = {VaR,Covariance,GARCH,EWMA,Market risk,Financial science,Financial time series,Volatility,Finansiering,Technological sciences,Teknik},
  language     = {eng},
  note         = {Student Paper},
  series       = {LUTVDG/TVBB5268SE},
  title        = {VaR methods for linear instruments},
  year         = {2008},
}