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Estimating and Testing Risk Approaches: A Technical Analysis using Affine Term Structure Models, Monte Carlo Simulation and GARCH Method

Svensson, Daniel LU (2011) NEKM01 20111
Department 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.
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author
Svensson, Daniel LU
supervisor
organization
course
NEKM01 20111
year
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},
  keyword      = {Economics,Econometrics,Value-at-Risk,Monte Carlo Simulation,GARCH Method},
  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},
}