A conditional-SGT-VaR approach with alternative GARCH models

Turan Bali () and Panayiotis Theodossiou ()

Annals of Operations Research, 2007, vol. 151, issue 1, 267 pages

Abstract: This paper proposes a conditional technique for the estimation of VaR and expected shortfall measures based on the skewed generalized t (SGT) distribution. The estimation of the conditional mean and conditional variance of returns is based on ten popular variations of the GARCH model. The results indicate that the TS-GARCH and EGARCH models have the best overall performance. The remaining GARCH specifications, except in a few cases, produce acceptable results. An unconditional SGT-VaR performs well on an in-sample evaluation and fails the tests on an out-of-sample evaluation. The latter indicates the need to incorporate time-varying mean and volatility estimates in the computation of VaR and expected shortfall measures. Copyright Springer Science+Business Media, LLC 2007

Keywords: GARCH models; Skewed generalized t distribution; Conditional value at risk; Expected shortfall (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1007/s10479-006-0118-4

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