Multiple-days-ahead value-at-risk and expected shortfall forecasting for stock indices, commodities and exchange rates: inter-day versus intra-day data

Stavros Degiannakis and Artemis Potamia

MPRA Paper from University Library of Munich, Germany

Abstract: In order to provide reliable Value-at-Risk (VaR) and Expected Shortfall (ES) forecasts, this paper attempts to investigate whether an inter-day or an intra-day model provides accurate predictions. We investigate the performance of inter-day and intra-day volatility models by estimating the AR(1)-GARCH(1,1)-skT and the AR(1)-HAR-RV-skT frameworks, respectively. This paper is based on the recommendations of the Basel Committee on Banking Supervision. Regarding the forecasting performances, the exploitation of intra-day information does not appear to improve the accuracy of the VaR and ES forecasts for the 10-steps-ahead and 20-steps-ahead for the 95%, 97.5% and 99% significance levels. On the contrary, the GARCH specification, based on the inter-day information set, is the superior model for forecasting the multiple-days-ahead VaR and ES measurements. The intra-day volatility model is not as appropriate as it was expected to be for each of the different asset classes; stock indices, commodities and exchange rates. The inter-day specification predicts VaR and ES measures adequately at a 95% confidence level. Regarding the 97.5% confidence level that has been recently proposed in the revised 2013 version of Basel III, the GARCH-skT specification provides accurate forecasts of the risk measures for stock indices and exchange rates but not for commodities (i.e. Silver and Gold). In the case of the 99% confidence level, we do not achieve sufficiently accurate VaR and ES forecasts for all the assets.

Keywords: Basel II; Basel III; Value-at-Risk; Expected Shortfall; volatility forecasting; intra-day data; multi-period-ahead; forecasting accuracy; risk modelling. (search for similar items in EconPapers)
JEL-codes: C15 C32 C53 G15 G17 (search for similar items in EconPapers)
Date: 2016-01-01
New Economics Papers: this item is included in nep-for, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/96278/1/MPRA_paper_74670.pdf revised version (application/pdf)

Related works:
Journal Article: Multiple-days-ahead value-at-risk and expected shortfall forecasting for stock indices, commodities and exchange rates: Inter-day versus intra-day data (2017)
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