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Combining non-constant weights with historical simulation VaR

Author

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  • Rebonato, Riccardo
  • Shanbhogue, Vasant

Abstract

This paper shows how the historical simulation method can be extended to deal with a time series that displays different importance weights. The method is shown to be particularly useful in dealing with seasonality. It builds on the work by Hull and White (1998) about volatility rescaling, and it demonstrates some subtle points that arise in the presence of non-constant weights across time series.

Suggested Citation

  • Rebonato, Riccardo & Shanbhogue, Vasant, 2010. "Combining non-constant weights with historical simulation VaR," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 3(4), pages 392-404, September.
    • Handle: RePEc:aza:rmfi00:y:2010:v:3:i:4:p:392-404
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    More about this item

    Keywords

    value-at-risk; historical simulation; weights; commodities;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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