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Value at Risk for Emerging Markets' Funds

Hägerdal, Måns LU and Andersson, Camilla LU (2014) NEKN01 20141
Department of Economics
Abstract
Value at Risk is a commonly used risk measure which calculates the smallest losses you risk to lose from having an asset, given a certain risk level and time period. Even though Value at Risk is applicable to all different types of assets, some studies suggest that this risk measure is not suitable for developing countries/emerging markets. This is because these countries’ assets generate very obscure or questionable return data. This essay applies some Value at Risk-models on top-performing funds from a number of low- and middle income countries in Africa, the Middle East and Latin America, and examines how well they fit these models. We calculate basic VaR for three confidence levels and two respective distributions (Normal distribution... (More)
Value at Risk is a commonly used risk measure which calculates the smallest losses you risk to lose from having an asset, given a certain risk level and time period. Even though Value at Risk is applicable to all different types of assets, some studies suggest that this risk measure is not suitable for developing countries/emerging markets. This is because these countries’ assets generate very obscure or questionable return data. This essay applies some Value at Risk-models on top-performing funds from a number of low- and middle income countries in Africa, the Middle East and Latin America, and examines how well they fit these models. We calculate basic VaR for three confidence levels and two respective distributions (Normal distribution and Student’s t-distribution), and compare these with GARCH and EGARCH models with the same distributions and confidence levels. We also calculate VaR with the historical simulation (HS) method. We calculate all values both with respect to short and long position. Our results indicate that no kind of model works significantly well for the countries’ funds in general. The models applicable to most countries were of the basic VaR and HS kind. We also find that the highest confidence level, 99%, was the one generating most acceptable models. (Less)
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author
Hägerdal, Måns LU and Andersson, Camilla LU
supervisor
organization
course
NEKN01 20141
year
type
H1 - Master's Degree (One Year)
subject
keywords
Value at Risk, Africa, the Middle East, Latin America, funds
language
English
id
4461325
date added to LUP
2014-06-23 10:43:22
date last changed
2014-06-23 10:43:22
@misc{4461325,
  abstract     = {Value at Risk is a commonly used risk measure which calculates the smallest losses you risk to lose from having an asset, given a certain risk level and time period. Even though Value at Risk is applicable to all different types of assets, some studies suggest that this risk measure is not suitable for developing countries/emerging markets. This is because these countries’ assets generate very obscure or questionable return data. This essay applies some Value at Risk-models on top-performing funds from a number of low- and middle income countries in Africa, the Middle East and Latin America, and examines how well they fit these models. We calculate basic VaR for three confidence levels and two respective distributions (Normal distribution and Student’s t-distribution), and compare these with GARCH and EGARCH models with the same distributions and confidence levels. We also calculate VaR with the historical simulation (HS) method. We calculate all values both with respect to short and long position. Our results indicate that no kind of model works significantly well for the countries’ funds in general. The models applicable to most countries were of the basic VaR and HS kind. We also find that the highest confidence level, 99%, was the one generating most acceptable models.},
  author       = {Hägerdal, Måns and Andersson, Camilla},
  keyword      = {Value at Risk,Africa,the Middle East,Latin America,funds},
  language     = {eng},
  note         = {Student Paper},
  title        = {Value at Risk for Emerging Markets' Funds},
  year         = {2014},
}