Applying GARCH-EVT-copula models for portfolio value-at-risk on G7 currency markets

Shian-Chang Huang, Yi Hsin Chienb, Ruei Ci Wangc

研究成果: Article同行評審

3 引文 斯高帕斯(Scopus)

摘要

This research estimates portfolio VaR (Value-at-Risk) on G7 exchange rates using a GJR-GARCH-EVT (extreme value theory)-Copula based approach. We first extracts the filtered residuals from each return series via an asymmetric GJR-GARCH model, then constructs the semi-parametric empirical marginal cumulative distribution function (CDF) of each asset using a Gaussian kernel estimate for the interior and a generalized Pareto distribution (GPD) estimate for the upper and lower tails (our approach focuses on the entire distribution rather than the tail distribution only). A Student's t copula is then fit to the data and used to induce correlation between the simulated residuals of each asset. In order to test the effectiveness of this model we backtest the estimated VaRs over a time window of 200 days. Empirical results demonstrate that our GJR-GARCH-EVT-Copula based approach outperforms traditional methods such as historical simulation or conditional Gaussian model.

原文English
頁(從 - 到)136-151
頁數16
期刊International Research Journal of Finance and Economics
74
出版狀態Published - 2011 八月 1

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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