Out of Sample Value-at-Risk and Backtesting with the Standardized Pearson Type-IV Skewed Distribution
Stavros Stavroyiannis () and
Leonidas Zarangas ()
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Stavros Stavroyiannis: Department of Finance and Auditing, Technological Educational Institute of Kalamata, Greece
Leonidas Zarangas: Department of Finance and Auditing, Technological Educational Institute of Epirus, Greece
Panoeconomicus, 2013, vol. 60, issue 2, 231-247
This paper studies the efficiency of an econometric model where the volatility is modeled by a GARCH (1,1) process, and the innovations follow a standardized form of the Pearson type-IV distribution. The performance of the model is examined by in sample and out of sample testing, and the accuracy is explored by a variety of Value-at-Risk methods, the success/failure ratio, the Kupiec-LR test, the independence and conditional coverage tests of Christoffersen, the expected shortfall measures, and the dynamic quantile test of Engle and Manganelli. Overall, the proposed model is a valid and accurate model performing better than the skewed Student-t distribution, providing the financial analyst with a good candidate as an alternative distributional scheme.
Keywords: Value-at-Risk; Econometric modeling; GARCH; Pearson type-IV distribution (search for similar items in EconPapers)
JEL-codes: C01 C46 C5 (search for similar items in EconPapers)
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