Naslov
Hybrid Historical Simulation VaR and ES: Performance in Developed and Emerging Markets

Autori
Žiković, Saša ; Filer, K. Randall

Izvornik
CESifo Working Papers

Vrsta, podvrsta
Ostale vrste radova, popularni rad

Godina
2011

Ključne riječi
Value at Risk; Expected shortfall; Hybrid historical simulation; Extreme value theory; Bootstrapping

Sažetak
In this paper, we introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles. We investigate the relative performance of VaR and ES models with the daily returns of sixteen stock market indexes (eight from developed and eight from emerging markets) prior to and during the current financial crisis. In addition to widely used VaR and ES models, we also study the behavior of conditional and unconditional extreme value (EV) models to generate 99% confidence level estimates. In the paper we develop a new loss function that relates tail losses to ES forecasts. The backtesting results show that only the proposed hybrid and EV based VaR models provide adequate protection in both developed and emerging markets, but the hybrid approach does this at a significantly lower cost (capital reserves). In ES estimation the hybrid model yields the smallest error statistics surpassing even the EV models, especially in the developed markets.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

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