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A Fast, Accurate Method for Value-at-Risk and Expected Shortfall

Jochen Krause () and Marc S. Paolella ()
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Jochen Krause: Department of Banking and Finance, University of Zurich, CH-8032 Zurich, Switzerland
Marc S. Paolella: Department of Banking and Finance, University of Zurich, CH-8032 Zurich, Switzerland

Econometrics, 2014, vol. 2, issue 2, 1-25

Abstract: A fast method is developed for value-at-risk and expected shortfall prediction for univariate asset return time series exhibiting leptokurtosis, asymmetry and conditional heteroskedasticity. It is based on a GARCH-type process driven by noncentral t innovations. While the method involves the use of several shortcuts for speed, it performs admirably in terms of accuracy and actually outperforms highly competitive models. Most remarkably, this is the case also for sample sizes as small as 250.

Keywords: GARCH; mixture-normal-GARCH; noncentral t; lookup table (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2014
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