Multi-period conditional distribution functions for heteroscedastic models with applications to VaR

Raymond Brummelhuis and Dominique Guegan ()
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Raymond Brummelhuis: Birckbeck College - Birckbeck College
Dominique Guegan: IDHE - Institutions et Dynamiques Historiques de l'Economie - ENS Cachan - École normale supérieure - Cachan - UP1 - Université Paris 1 Panthéon-Sorbonne - UP8 - Université Paris 8 Vincennes-Saint-Denis - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: For a GARCH(1,1) process, we study the large deviation asymptotics at the horizon k and their consequences for extreme quantile estimation. The results are relevant for the estimation of multi-period Value at Risk and prove that the heuristic "square k" rule used in financial risk management is false in the context of GARCH processes.

Keywords: GARCH models; Large deviation probabilities; Laplace integrals; Value at risk; Value at risk. (search for similar items in EconPapers)
Date: 2005
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00179336
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Citations: View citations in EconPapers (3)

Published in Journal of Applied Probability, 2005, 42 (2), pp.35-55

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00179336

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