VaR BASED RISK MANAGEMENT

Mária Bohdalová () and Michal Greguš ()
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Mária Bohdalová: Comenius University in Bratislava
Michal Greguš: Comenius University in Bratislava

CBU International Conference Proceedings, 2013, vol. 1, issue 0, 25-33

Abstract: In this paper we discuss the Value–at–Risk concept and we analyse the market risk by using EWMA approach. EWMA (exponentially weighted moving average) forecasting technique is a popular measure of various risks in financial risk management. We will compare standard EWMA, robust EWMA and skewed EWMA forecast of VaR. JP Morgan standard EWMA is derived from Gaussian distribution. Robust EWMA is based on Laplace distribution and skewed EWMA is a new approach derived from an asymmetric Laplace distribution. Asymmetric Laplace distribution takes into account both skewness and heavy tails in return distribution and the time varying nature of them in practice. Skewed EWMA VaR is a generalization of the standard EWMA method. Using these approaches we will analyse selected financial series (three European market indexes and one exchange rate). We have found andconfirmed that skewed EWMA forecasting of VaR outperforms the standard EWMA method.

Keywords: EWMA VaR; robust; skewed EWMA VaR; Value–at–Risk (search for similar items in EconPapers)
JEL-codes: C15 G11 G17 G32 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:aad:iseicj:v:1:y:2013:i:0:p:25-33

DOI: 10.12955/cbup.v1.11

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