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Dynamic factor Value-at-Risk for large heteroskedastic portfolios

Sirio Aramonte, Marius del Giudice Rodriguez and Jason Wu

Journal of Banking & Finance, 2013, vol. 37, issue 11, 4299-4309

Abstract: We propose a methodology that can efficiently measure the Value-at-Risk (VaR) of large portfolios with time-varying volatility and correlations by bringing together the established historical simulation framework and recent contributions to the dynamic factor models literature. We find that the proposed methodology performs well relative to widely used VaR methodologies, and is a significant improvement from a computational point of view.

Keywords: Risk management; Value-at-Risk; Dynamic factor models (search for similar items in EconPapers)
JEL-codes: C53 C58 G32 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Dynamic factor value-at-risk for large, heteroskedastic portfolios (2011) Downloads
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