Estimation Adjusted VaR

Christian Gourieroux and Jean-Michel Zakoian

No 2012-16, Working Papers from Center for Research in Economics and Statistics

Abstract: Standard risk measures, such as the Value-at-Risk (VaR), or the Expected Shortfall, have to be estimated and their estimated counterparts are subject to estimation uncertainty. Replacing, in the theoretical formulas, the true parameter value by an estimator based on n observations of the Profit and Loss variable, induces an asymptotic bias of order 1/n in the coverage probabilities. This paper shows how to correct for this bias by introducing a new estimator of the VaR, called Estimation adjusted VaR (EVaR). This adjustment allows for a joint treatment of theoretical and estimation risks, taking into account for their possible dependence. The estimator is derived for a general parametric dynamic model and is particularized to stochastic drift and volatility models. The finite sample properties of the EVaR estimator are studied by simulation and an empirical study of the S&P Index is proposed

Keywords: Value-at-Risk; Estimation Risk; Bias Correction; ARCH Model (search for similar items in EconPapers)
Pages: 41
Date: 2012-09
New Economics Papers: this item is included in nep-ban, nep-ecm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://crest.science/RePEc/wpstorage/2012-16.pdf Crest working paper version (application/pdf)

Related works:
Journal Article: ESTIMATION-ADJUSTED VAR (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:crs:wpaper:2012-16

Access Statistics for this paper

More papers in Working Papers from Center for Research in Economics and Statistics Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Murielle Jules Maintainer-Email : murielle.jules@ensae.Fr.