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Global financial crisis and VaR performance in emerging markets: A case of EU candidate states - Turkey and Croatia

Saša Žiković and Bora Aktan ()

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2009, vol. 27, issue 1, 149-170

Abstract: We investigate the relative performance of a wide array of Value at Risk (VaR) models with the daily returns of Turkish (XU100) and Croatian (CROBEX) stock index prior to and during the ongoing financial crisis. In addition to widely used VaR models, we also study the behaviour of conditional and unconditional extreme value theory (EVT) and hybrid historical simulation (HHS) models to generate 95, 99 and 99.5% confidence level estimates. Results indicate that during the crisis period all tested VaR model except EVT and HHS models seriously underpredict the true level of risk, with EVT models doing so at a higher cost of capital com- pared to HHS model.

Keywords: financial crisis; emerging markets; Value at Risk; extreme value theory; hybrid historical simulation (search for similar items in EconPapers)
JEL-codes: G24 C14 C22 C52 C53 (search for similar items in EconPapers)
Date: 2009
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