Violation duration as a better way of VaR model evaluation: evidence from Turkish market portfolio

Ekrem Kilic

MPRA Paper from University Library of Munich, Germany

Abstract: Financial crisis those we have been experienced during last two decades encouraged the efforts of both academicians and the market participants to develop clear representations of the risk exposure of a �nancial institute. As a useful tool for measuring market risk of a portfolio, Value-at-Risk has emerged as the standard. However, there are several alternative Value-at-Risk implementations which may pro- duce signi�cantly di¤erent Value-at-Risk forecasts. Thus, evaluation of Value-at-Risk forecasts is as crucial as VaR itself. In this paper I will use the methodology which has described by Christoffersen and Pelletier[6] and I extended the methodology to create duration based analogous of unconditional coverage, conditional coverage and inde- pendence tests. I evaluated 14 Value-at-Risk implementation by using a Turkish Market portfolio which contain foreing currency, stock and bonds.

Keywords: Value-at-Risk; model evaluation; conditional cover- age; duration based coverage testing (search for similar items in EconPapers)
JEL-codes: C52 G11 (search for similar items in EconPapers)
Date: 2006-05-01
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