Naslov
Testing Popular VaR Models in EU new member and candidate states

Autori
Žiković, Saša

Izvornik
Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu (1331-8004) 25 (2007), 2; 325-346

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
EU new member and candidate states ; stock indexes ; risk management ; market risk ; GARCH

Sažetak
The impact of allowing banks to calculate their capital requirement based on their internal VaR models, and the impact of regulation changes on banks in transitional countries, unfortunately, has not been well studied. This paper examines whether VaR models that are created and suited for developed markets apply to the volatile stock markets of EU new member and candidate states (Bulgaria, Romania, Croatia and Turkey). Nine popular VaR models are tested on five stock indexes from EU new member and candidate states. Backtesting results show that VaR models commonly used in developed stock market are not well suited for measuring market risk in these markets. Presented findings bear very important implications that have to be addressed by regulators and risk practitioners operating in EU new member and candidate states. Risk managers have to start thinking outside the frames set by their parent companies or else investors present in these markets may find themselves in serious trouble, dealing with losses that they were not expecting. National regulators have to take into consideration that simplistic VaR models that are widely used in some developed countries are not well suited for these illiquid and developing stock markets.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA