EconPapers    
Economics at your fingertips  
 

Semi-parametric Dynamic Asymmetric Laplace Models for Tail Risk Forecasting, Incorporating Realized Measures

Richard Gerlach and Chao Wang

Papers from arXiv.org

Abstract: The joint Value at Risk (VaR) and expected shortfall (ES) quantile regression model of Taylor (2017) is extended via incorporating a realized measure, to drive the tail risk dynamics, as a potentially more efficient driver than daily returns. Both a maximum likelihood and an adaptive Bayesian Markov Chain Monte Carlo method are employed for estimation, whose properties are assessed and compared via a simulation study; results favour the Bayesian approach, which is subsequently employed in a forecasting study of seven market indices and two individual assets. The proposed models are compared to a range of parametric, non-parametric and semi-parametric models, including GARCH, Realized-GARCH and the joint VaR and ES quantile regression models in Taylor (2017). The comparison is in terms of accuracy of one-day-ahead Value-at-Risk and Expected Shortfall forecasts, over a long forecast sample period that includes the global financial crisis in 2007-2008. The results favor the proposed models incorporating a realized measure, especially when employing the sub-sampled Realized Variance and the sub-sampled Realized Range.

New Economics Papers: this item is included in nep-ecm, nep-for and nep-rmg
Date: 2018-05
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1805.08653 Latest version (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:arx:papers:1805.08653

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2018-06-23
Handle: RePEc:arx:papers:1805.08653