General Aspects Regarding the Methodology for Prediction Risk

Victoria Gabriela Anghelache, Dumitru Cristian Oanea and Bogdan Zugravu
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Victoria Gabriela Anghelache: Academy of Economic Studies, Bucharest
Dumitru Cristian Oanea: Academy of Economic Studies, Bucharest

Romanian Statistical Review Supplement, 2013, vol. 61, issue 2, 66-72

Abstract: In order to measure the total risk to which an investor or a financial institution is exposed when they invest in a financial asset, there needs to be a tool to capture this risk. The most widely used tool in measuring the total risk is Value at Risk. The first parameter that must be estimated is represented by the decay factor, because based on its value we will estimate further the volatility and Value at Risk. However, we are not just interested in computing the VaR for all considered models, but moreover we want to test if models used in these estimations are accurate and able to predict the risk. To achieve this objective we will use two types of test: unconditional coverage test and conditional coverage test.

Keywords: financial instrument; prediction; risk metrics; risk prediction (search for similar items in EconPapers)
JEL-codes: D81 G32 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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