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Converting Tail-VaR to VaR: An Econometric Study

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  • Christian Gourieroux
  • Wei Liu
  • Gourieroux Liu

Abstract

This paper studies the link between two popular measures of risk, that are the Value-at-Risk (VaR) and the Tail-VaR (TVaR). We study how the TVaR and VaR are related through their risk levels and characterize the underlying distributions under which this relationship is linear. A large portion of this paper is devoted to the related econometric analysis, such as the estimation and test of this relationship. We apply the results to currency portfolios and observe that this linearity relationship between the TVaR and VaR is a surprisingly common phenomenon for the portfolios considered for both historical and conditional risk measures. Copyright The Author 2012. Published by Oxford University Press. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Suggested Citation

  • Christian Gourieroux & Wei Liu & Gourieroux Liu, 2008. "Converting Tail-VaR to VaR: An Econometric Study," Journal of Financial Econometrics, Oxford University Press, vol. 10(2), pages 233-264, 2012 10 2.
    • Handle: RePEc:oup:jfinec:v:10:y:2008:i:2:p:233-264
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbs001
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