How Risky Is the Value at Risk?
Roxana Chiriac () and
Winfried Pohlmeier ()
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Roxana Chiriac: University of Konstanz, CoFE
Authors registered in the RePEc Author Service: Roxana Halbleib (Chiriac) ()
Working Paper series from Rimini Centre for Economic Analysis
The recent financial crisis has raised numerous questions about the accuracy of value-at-risk (VaR) as a tool to quantify extreme losses. In this paper we present empirical evidence from assessing the out-of-sample performance and robustness of VaR before and during the recent financial crisis with respect to the choice of sampling window, return distributional assumptions and stochastic properties of the underlying financial assets. Moreover we develop a new data driven approach that is based on the principle of optimal combination and that provides robust and precise VaR forecasts for periods when they are needed most, such as the recent financial crisis.
Keywords: Value at Risk; model risk; optimal forecast combination (search for similar items in EconPapers)
JEL-codes: C21 C5 G01 G17 G28 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-ecm, nep-for, nep-ore, nep-rmg and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:07_10
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