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Nonparametric Inference of Value-at-Risk for Dependent Financial Returns

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  • Song Xi Chen

Abstract

The article considers nonparametric estimation of value-at-risk (VaR) and associated standard error estimation for dependent financial returns. Theoretical properties of the kernel VaR estimator are investigated in the context of dependence. The presence of dependence affects the variance of the VaR estimates and has to be taken into consideration in order to obtain adequate assessment of their variation. An estimation procedure of the standard errors is proposed based on kernel estimation of the spectral density of a derived series. The performance of the VaR estimators and the proposed standard error estimation procedure are evaluated by theoretical investigation, simulation of commonly used models for financial returns, and empirical studies on real financial return series. Copyright 2005, Oxford University Press.

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Bibliographic Info

Article provided by Society for Financial Econometrics in its journal Journal of Financial Econometrics.

Volume (Year): 3 (2005)
Issue (Month): 2 ()
Pages: 227-255

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Handle: RePEc:oup:jfinec:v:3:y:2005:i:2:p:227-255

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Cited by:
  1. Cotter, John & Dowd, Kevin, 2007. "Evaluating the Precision of Estimators of Quantile-Based Risk Measures," MPRA Paper 3504, University Library of Munich, Germany.
  2. Qinchi Zhang & Wenzhi Yang & Shuhe Hu, 2014. "On Bahadur representation for sample quantiles under α-mixing sequence," Statistical Papers, Springer, Springer, vol. 55(2), pages 285-299, May.
  3. Cai, Zongwu & Li, Qi & Park, Joon Y., 2009. "Functional-coefficient models for nonstationary time series data," Journal of Econometrics, Elsevier, Elsevier, vol. 148(2), pages 101-113, February.
  4. Jianqing Fan, 2004. "A selective overview of nonparametric methods in financial econometrics," Papers, arXiv.org math/0411034, arXiv.org.
  5. John Cotter & Kevin Dowd, 2011. "Estimating Financial Risk Measures for Futures Positions:A Non-Parametric Approach," Working Papers, Geary Institute, University College Dublin 200613, Geary Institute, University College Dublin.
  6. Maria Rosa Nieto & Esther Ruiz, 2008. "Measuring financial risk : comparison of alternative procedures to estimate VaR and ES," Statistics and Econometrics Working Papers, Universidad Carlos III, Departamento de Estadística y Econometría ws087326, Universidad Carlos III, Departamento de Estadística y Econometría.
  7. Sasa Zikovic & Randall Filer, 2009. "Hybrid Historical Simulation VaR and ES: Performance in Developed and Emerging Markets," CESifo Working Paper Series, CESifo Group Munich 2820, CESifo Group Munich.
  8. Alexander, Carol & Sheedy, Elizabeth, 2008. "Developing a stress testing framework based on market risk models," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(10), pages 2220-2236, October.
  9. Abdoul G. Sam, 2010. "Nonparametric estimation of market risk: an application to agricultural commodity futures," Agricultural Finance Review, Emerald Group Publishing, Emerald Group Publishing, vol. 70(2), pages 285-297, August.
  10. Yang Yan & Dajing Shang & Oliver Linton, 2012. "Efficient estimation of conditional risk measures in a semiparametric GARCH model," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP25/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  11. María Rosa Nieto & Esther Ruiz, 2010. "Bootstrap prediction intervals for VaR and ES in the context of GARCH models," Statistics and Econometrics Working Papers, Universidad Carlos III, Departamento de Estadística y Econometría ws102814, Universidad Carlos III, Departamento de Estadística y Econometría.
  12. Saša ŽIKOVIÆ & Randall K. FILER, 2013. "Ranking of VaR and ES Models: Performance in Developed and Emerging Markets," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, Charles University Prague, Faculty of Social Sciences, vol. 63(4), pages 327-359, August.
  13. repec:wyi:journl:002096 is not listed on IDEAS
  14. repec:wyi:wpaper:001958 is not listed on IDEAS
  15. Cai, Zongwu & Wang, Xian, 2008. "Nonparametric estimation of conditional VaR and expected shortfall," Journal of Econometrics, Elsevier, Elsevier, vol. 147(1), pages 120-130, November.
  16. Chun, So Yeon & Shapiro, Alexander & Uryasev, Stan, 2011. "Conditional Value-at-Risk and Average Value-at-Risk: Estimation and Asymptotics," MPRA Paper 30132, University Library of Munich, Germany.
  17. repec:wyi:journl:002095 is not listed on IDEAS

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