Multifractal Value at Risk model

Hojin Lee, Jae Wook Song and Woojin Chang

Physica A: Statistical Mechanics and its Applications, 2016, vol. 451, issue C, 113-122

Abstract: In this paper new Value at Risk (VaR) model is proposed and investigated. We consider the multifractal property of financial time series and develop a multifractal Value at Risk (MFVaR). MFVaR introduced in this paper is analytically tractable and not based on simulation. Empirical study showed that MFVaR can provide the more stable and accurate forecasting performance in volatile financial markets where large loss can be incurred. This implies that our multifractal VaR works well for the risk measurement of extreme credit events.

Keywords: Value at Risk; Multifractality; Binomial multifractal model; Multifractal model of asset return; Financial time series (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:451:y:2016:i:c:p:113-122

DOI: 10.1016/j.physa.2015.12.161

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