A Value-at-Risk forecastability indicator in the framework of a Generalized Autoregressive Score with “Asymmetric Laplace Distribution”

Dima Bogdan, Dima Ştefana Maria and Ioan Roxana

Finance Research Letters, 2022, vol. 45, issue C

Abstract: In the present paper we discuss the forecasting ability of the VaR model, within the context of a Generalized Autoregressive Score (GAS). The proposed method considers an Asymmetric Laplace Distribution (GAS-ALD) to describe the daily log-returns of the analyzed data. A forecastability indicator for a certain probability of VaR is proposed. The approach uses back-testing and several unconditional and conditional tests, to see whether or not the GAS-ALD model accurately describes the specificity of log-returns’ distribution. Our results show a strong connection between this indicator and the informational efficiency of financial markets, as it indirectly reflects shifts in market efficiency.

Keywords: Value-at Risk; Generalized Autoregressive Score; Asymmetric Laplace Distribution; Informational efficiency (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002154

DOI: 10.1016/j.frl.2021.102134

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