Implications of Measuring VaR Using Historical Simulation ; An Example of Zagreb Stock Exchange Index - Crobex (CROSBI ID 33656)
Prilog u knjizi | izvorni znanstveni rad
Podaci o odgovornosti
Žiković, Saša
engleski
Implications of Measuring VaR Using Historical Simulation ; An Example of Zagreb Stock Exchange Index - Crobex
In this paper the author tests the acceptability of measuring Value at Risk (VaR) with Historical simulation in Croatian financial market, specifically Zagreb stock exchange. Since its introduction in the early ’ 80, VaR methodology has become the most popular way of measuring and managing market risk. Value at Risk can be described as the worst loss that can be expected from holding a portfolio of securities, over a certain period of time, given a specified level of probability, under normal market conditions. The most common classification of VaR methods found in literature is that of: parametric VaR estimates, Historical simulation and Monte Carlo simulation. Each of these approaches for measuring VaR has its’ own advantages and disadvantages. The author in this paper focuses on Historical simulation because of its’ three main advantages over the parametric approach for measuring VaR – Historical simulation: (1) does not presume that returns are normally distributed, (2) is simple to calculate since there is no need for variance-covariance matrices and (3) can easily accommodate skewness, kurtosis and other features of empirical distribution that cause serious problems for parametric approach. Assumption of normal “ Gaussian” distribution cannot be observed in transitional and emerging economies, and as such could seriously distort the VaR figures obtained by the use of a parametric approach. The applicability of historical simulation is tested on CROBEX index – the stock index of Zagreb stock exchange. Historical simulation with five different observation periods (50, 100, 175, 250 and 400 days) is tested on CROBEX index. VaR figures at 95% and 99% confidence level are tested for each of the different opservation periods. In conclusion the results of the research are analyzed and useful suggestions for future research are given.
Croatia, CROBEX index, Value at Risk, Historical simulation
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Podaci o prilogu
367-389-x.
objavljeno
Podaci o knjizi
Resource Allocation and Institutions: Explorations in Economics, Finance and Law
Roufagalas, John
Atena: Athens Institute for Education and Research (ATINER)
2006.
960-6672-01-8