Naslov
Measuring Market Risk in CEE Countries

Autori
Žiković, Saša

Vrsta, podvrsta i kategorija rada
Poglavlja u knjigama, znanstveni

Knjiga
Accounting and Finance in Transition, Vol. 5.

Urednik/ci
Šević, Željko

Izdavač
Greenwich University Press

Grad
London : Delhi

Godina
2008

Raspon stranica
77-102

ISBN
1-86166-252-1

Ključne riječi
Market risk, Basel II, VaR, Hybrid historical simulation, CEE countries

Sažetak
This paper examines different ways of calculating VaR in transitional economies of CEE countries. CEE countries are all exposed to very similar processes of strong inflow of foreign direct and portfolio investments, and offer possibilities of huge profits for investors. Banks and investment funds when investing in these financial markets employ the same risk measurement models for measuring market risk and forming of provision as they do in the developed markets. This means that risk managers in banks operating in CEE countries de facto presume similar characteristics and behaviour in these markets, as they would expect in developed markets. Using the VaR models, that are created and suited for developed and liquid markets, in developing markets raises a serious dilemma: Do the commonly used VaR models adequately capture market risk of these markets or are they only giving a false sense of security? In this paper the author also develops a new semi parametric VaR model that combines ARMA-GARCH volatility forecasting with bootstrapping, which should be more appropriate for turbulent transitional capital markets. Ten VaR models are tested on five stock indexes from CEE countries. Performance of analysed VaR models is tested by Kupiec test, Christoffersen unconditional coverage, independence and conditional coverage test, Lopez test, Blanco-Ihle test, Root Mean Squared Error(RMSE) and Mean Absolute Percentage Error(MAPE). The obtained results show that VaR models based on ARMA-GARCH volatility forecasts are superior to other tested types of VaR models. The findings show that common VaR models that are widely used in mature markets, such as historical simulation, variance-covariance model and RiskMetrics system are not well suited to transitional capital markets.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA