Value-at-Risk Analysis for the Tunisian Currency Market: A Comparative Study
AbstractThe main purpose of this paper is to compare empirically four Value-at-Risk simulation methods, namely, the Variance-Covariance, the Historical Simulation, the Bootstrapping and the Monte Carlo. We tried to estimate the VaR associated to three currencies and four currency portfolios in the Tunisian exchange market. Data covers the period between 01-01-1999 and 31-12-2007. Independently of the used technique, the Japanese Yen seems to be the most risky currency. Moreover, the portfolio diversification reduces the exchange rate risk. Lastly, the number of violations, when they exist, does not generally differ between the simulation methods. Recent evaluation tests were applied to select the most appropriate technique predicting precisely the exchange rate risk. Results based on these tests suggest that the traditional Variance-Covariance is the most appropriate method.
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Bibliographic InfoArticle provided by Econjournals in its journal International Journal of Economics and Financial Issues.
Volume (Year): 2 (2012)
Issue (Month): 2 ()
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Value-at-Risk; Tunisian currency market; Monte Carlo simulation;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
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