Estimating and Testing Risk Approaches: A Technical Analysis using Affine Term Structure Models, Monte Carlo Simulation and GARCH Method
(2011) NEKM01 20111Department of Economics
- Abstract
- This paper investigates if the Log-Normal Mean-Reverting Ornstein-Uhlenbeck spot price (LNMROU) and the Vasicek (1977) process can forecast Value-at-Risk (VaR) using the Monte Carlo method. The results from LNMROU are validated against Delta-Normal-GARCH (DNG) and Historical Simulation (HS) which are well known approaches for VaR estimations. The backtested results indicated that HS and DNG are good measures for VaR-estimation and that LNMROU failed in capturing price changes in the stock index market. The Vasicek (1977) proved to be a good model for forecasting VaR.
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1977109
- author
- Svensson, Daniel LU
- supervisor
- organization
- course
- NEKM01 20111
- year
- 2011
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Economics, Econometrics, Value-at-Risk, Monte Carlo Simulation, GARCH Method
- language
- English
- id
- 1977109
- date added to LUP
- 2011-06-16 14:42:22
- date last changed
- 2011-06-16 14:42:22
@misc{1977109, abstract = {{This paper investigates if the Log-Normal Mean-Reverting Ornstein-Uhlenbeck spot price (LNMROU) and the Vasicek (1977) process can forecast Value-at-Risk (VaR) using the Monte Carlo method. The results from LNMROU are validated against Delta-Normal-GARCH (DNG) and Historical Simulation (HS) which are well known approaches for VaR estimations. The backtested results indicated that HS and DNG are good measures for VaR-estimation and that LNMROU failed in capturing price changes in the stock index market. The Vasicek (1977) proved to be a good model for forecasting VaR.}}, author = {{Svensson, Daniel}}, language = {{eng}}, note = {{Student Paper}}, title = {{Estimating and Testing Risk Approaches: A Technical Analysis using Affine Term Structure Models, Monte Carlo Simulation and GARCH Method}}, year = {{2011}}, }