The prediction of conditional losses - an evaluation of univariate Value at Risk models
(2005)Department of Economics
- Abstract
- Engle (1982) explained in his classic paper what is meant by a "good" interval forecast. His main insight was that intervals should be narrow in tranquil times and wide in volatile times so that the times when the interval forecast fails are spread out over the sample and not come in clusters. On the basis of Engle's criterias, Christoffersen (1998) was the first to form a complete theory for evaluating interval forecasts. He developed a consistent framework for conditional interval forecast evaluation. This study investigates how three Value at Risk models, the Historical simulation, the Monte Carlo simulation and the GARCH model predict conditional losses. The different models are applied on two assets, the OMX index and Handelsbanken... (More)
- Engle (1982) explained in his classic paper what is meant by a "good" interval forecast. His main insight was that intervals should be narrow in tranquil times and wide in volatile times so that the times when the interval forecast fails are spread out over the sample and not come in clusters. On the basis of Engle's criterias, Christoffersen (1998) was the first to form a complete theory for evaluating interval forecasts. He developed a consistent framework for conditional interval forecast evaluation. This study investigates how three Value at Risk models, the Historical simulation, the Monte Carlo simulation and the GARCH model predict conditional losses. The different models are applied on two assets, the OMX index and Handelsbanken Markets Nordic Bond Indices, representing hypothetical portfolios. Furthermore, the study investigates how the use of an evaluation framework can contribute to achieve better interval forecasts. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1644010
- author
- Lövgren, Michael and Falk, Fredrik
- supervisor
- organization
- year
- 2005
- type
- M2 - Bachelor Degree
- subject
- keywords
- Value at Risk, Evaluation framework, Conditional losses, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
- language
- English
- id
- 1644010
- date added to LUP
- 2005-02-11 00:00:00
- date last changed
- 2010-08-05 13:56:20
@misc{1644010,
abstract = {{Engle (1982) explained in his classic paper what is meant by a "good" interval forecast. His main insight was that intervals should be narrow in tranquil times and wide in volatile times so that the times when the interval forecast fails are spread out over the sample and not come in clusters. On the basis of Engle's criterias, Christoffersen (1998) was the first to form a complete theory for evaluating interval forecasts. He developed a consistent framework for conditional interval forecast evaluation. This study investigates how three Value at Risk models, the Historical simulation, the Monte Carlo simulation and the GARCH model predict conditional losses. The different models are applied on two assets, the OMX index and Handelsbanken Markets Nordic Bond Indices, representing hypothetical portfolios. Furthermore, the study investigates how the use of an evaluation framework can contribute to achieve better interval forecasts.}},
author = {{Lövgren, Michael and Falk, Fredrik}},
language = {{eng}},
note = {{Student Paper}},
title = {{The prediction of conditional losses - an evaluation of univariate Value at Risk models}},
year = {{2005}},
}