Comparing value-at-risk methodologies

Luiz Lima () and Breno Neri ()

No 629, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: In this paper, we compare four different Value-at-Risk (V aR) methodologies through Monte Carlo experiments. Our results indicate that the method based on quantile regression with ARCH effect dominates other methods that require distributional assumption. In particular, we show that the non-robust methodologies have higher probability to predict V aRs with too many violations. We illustrate our findings with an empirical exercise in which we estimate V aR for returns of S˜ao Paulo stock exchange index, IBOVESPA, during periods of market turmoil. Our results indicate that the robust method based on quantile regression presents the least number of violations.

Date: 2006-11-01
New Economics Papers: this item is included in nep-ias and nep-rmg
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Comparing Value-at-Risk Methodologies (2007)
Working Paper: Comparing Value-at-Risk Methodologies (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgewp:629

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