COMPARISON OF SEMI-PARAMETRIC AND BENCHMARK VALUE-AT-RISK MODELS IN SEVERAL TIME PERIODS WITH DIFFERENT VOLATILITY LEVELS

Mateusz Buczyński and Marcin Chlebus
Additional contact information
Mateusz Buczyński: University of Warsaw
Marcin Chlebus: University of Warsaw

Financial Internet Quarterly, 2018, vol. 14, issue 2, 67-82

Abstract: In the literature, there is no consensus as to which Value-at-Risk forecasting model is the best for measuring market risk in banks. In the study an analysis of Value-at-Risk forecasting model quality over varying economic stability periods for main indices from stock exchanges was conducted. The VaR forecasts from GARCH(1,1), GARCH-t(1,1), GARCH-st(1,1), QML-GARCH(1,1), CAViaR and historical simulation models in periods with contrasting volatility trends (increasing, constantly high and decreasing) for countries economically developed (the USA – S&P 500, Germany - DAX and Japan – Nikkei 225) and economically developing (China – SSE COMP, Poland – WIG20 and Turkey – XU100) were compared. The data samples used in the analysis were selected from the period 01.01.1999 – 24.03.2017. To assess the VaR forecast quality: excess ratio, Basel traffic light test, coverage tests (Kupiec test, Christoffersen test), Dynamic Quantile test, cost functions and Diebold-Marino test were used. Obtained results show that the quality of Value-at-Risk forecasts for the models varies depending on a volatility trend. However, GARCH-st (1,1) and QML-GARCH(1,1) were found to be the most robust models in the different volatility periods. The results show as well that the CAViaR model forecasts were less appropriate in the increasing volatility period. Moreover, no significant differences for the VaR forecast quality were found for the developed and developing countries.

Keywords: Value-at-Risk; CAViaR; GARCH; combined forecasts; quality assessment; risk management (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journals.wsiz.edu.pl/fiq/article/view/634 Abstract page (text/html)
https://journals.wsiz.edu.pl/fiq/article/download/634/595 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsz:fiq000:v:14:y:2018:i:2:id:634

DOI: 10.2478/fiqf-2018-0013

Access Statistics for this article

More articles in Financial Internet Quarterly from University of Information Technology and Management in Rzeszów
Bibliographic data for series maintained by Wiesław Stręciwilk ().