Advanced Search
MyIDEAS: Login

Stock index Value-at-Risk forecasting: A realized volatility extreme value theory approach

Contents:

Author Info

  • Dimitrios P. Louzis

    () (Bank of Greece / Athens University of Economics and Business)

  • Spyros Xanthopoulos - Sissinis

    () (Athens University of Economics and Business)

  • Apostolos P. Refenes

    () (Athens University of Economics and Business)

Abstract

In this study, we propose the use of Heterogeneous Autoregressive (HAR) type realized volatility models in combination with the Extreme Value Theory (EVT) method for Value-at-Risk (VaR) forecasting. The proposed model accounts for the long memory property of the realized volatility and the fat tails of the returns distribution. The out-of-sample forecasting results, based on the S&P 500 stock index, indicate that the HAR-type-EVT models outperform their GARCH-type counterparts in terms of statistical and regulatory accuracy as well as capital efficiency. The HAR-GARCH-EVT model, which also accounts for the conditional heteroscedasticity of the HAR errors, is the overall best performing model as it generates accurate VaR estimates that minimize the Basel II regulatory capital during both the full out-of-sample period and the 2007-2009 crisis period.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I1-P93.pdf
Download Restriction: no

Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 1 ()
Pages: 981-991

as in new window
Handle: RePEc:ebl:ecbull:eb-11-00870

Contact details of provider:

Related research

Keywords: Value-at-Risk; High frequency data; Extreme value Theory; Financial Crisis; GARCH;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Clements, Michael P. & Galvão, Ana Beatriz & Kim, Jae H., 2008. "Quantile forecasts of daily exchange rate returns from forecasts of realized volatility," Journal of Empirical Finance, Elsevier, vol. 15(4), pages 729-750, September.
  2. Fong Chan, Kam & Gray, Philip, 2006. "Using extreme value theory to measure value-at-risk for daily electricity spot prices," International Journal of Forecasting, Elsevier, vol. 22(2), pages 283-300.
  3. Dimitrios P. Louzis & Spyros Xanthopoulos-Sisinis & Apostolos P. Refenes, 2012. "Stock index realized volatility forecasting in the presence of heterogeneous leverage effects and long range dependence in the volatility of realized volatility," Applied Economics, Taylor and Francis Journals, vol. 44(27), pages 3533-3550, September.
  4. Angelidis, Timotheos & Degiannakis, Stavros, 2008. "Volatility forecasting: Intra-day versus inter-day models," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(5), pages 449-465, December.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-11-00870

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.