Accurate Value-at-Risk forecast with the (good old) normal-GARCH model

Christoph Hartz, Stefan Mittnik and Marc S. Paolella

No 2006/23, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: A resampling method based on the bootstrap and a bias-correction step is developed for improving the Value-at-Risk (VaR) forecasting ability of the normal-GARCH model. Compared to the use of more sophisticated GARCH models, the new method is fast, easy to implement, numerically reliable, and, except for having to choose a window length L for the bias-correction step, fully data driven. The results for several different financial asset returns over a long out-of-sample forecasting period, as well as use of simulated data, strongly support use of the new method, and the performance is not sensitive to the choice of L.

Keywords: Bootstrap; GARCH; Value-at-Risk (search for similar items in EconPapers)
JEL-codes: C22 C53 C63 G12 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200623

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