GARCH-class models estimations and value-at-risk analysis for exchange rate

Samir Mabrouk and Chaker Aloui

International Journal of Monetary Economics and Finance, 2011, vol. 4, issue 3, 254-278

Abstract: In this paper, we focus on three daily exchange rate returns dynamics. Indeed, we have assessed five GARCH-class models under three alternative distributions. Our findings confirm that the skewed Student-t FIAPARCH model performs very well. Then, we have computed short and long Value-at-Risk and Expected Shortfall based on AR (1) – FIAPARCH under normal, Student-t and skewed Student-t distributions. More precisely, we have investigated the estimation performance by computing both In-sample and Out-of-sample VaR for one-day-ahead horizon. Results reveal that VaR and ES estimations based on skewed Student-t FIAPARCH models outperform other models for both long and short trading positions.

Keywords: value at risk; VaR; expected shortfall; fat tail; long memory; exchange rates; GARCH. (search for similar items in EconPapers)
Date: 2011
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