Value-at-risk model based on extreme value theory:comparison with other models under the basel accord

Santos, Paulo Araújo; Jiménez-Martin, Juan-Ángel; McAleer, Michael; Pérez Amaral, Teodosio

http://hdl.handle.net/10400.15/582

Use this identifier to reference this record.

Name:	Description:	Size:	Format:
PauloSantos_ISF_2011.pdf		1.95 MB	Adobe PDF	Download

Send Feedback

Authors

Santos, Paulo Araújo

Jiménez-Martin, Juan-Ángel

McAleer, Michael

Pérez Amaral, Teodosio

Abstract(s)

Since the Basel II accord, forecasting Value-at-Risk become a daily task of banks and other Authorized Deposit-taking Institutions (ADIs). These forecasts are used to determine capital requirements and associated capital costs of ADIs. Methods based on Extreme Value Theory (EVT) showed better performance in terms of unconditional coverage and independence in many comparative studies. In this work we compare, in terms of daily capital requirements and violation penalties under the Basel II accord, the performance of a new model based on the EVT, with other models based on EVT, GARCH-type models and the Riskmetrics model. We emphasize that with the indexes under study and taking into account the Basel penalty zones, we achieve much better results with this new model than with the well known Riskmetrics model.

Keywords

Daily capital Basel II accord EVT GARCH Riskmetrics model

URI

http://hdl.handle.net/10400.15/582

Citation

SANTOS, P. Araújo ; JIMÉNEZ-MARTIN, Juan-Ángel ; McALEER, Michael ; PÉREZ AMARAL, Teodosio - Value-at-risk model based on extreme value theory : comparison with other models under the basel accord. International Symposium on Forecasting, 31, Prague, 2011