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Robust Estimation in VaR Modelling - Univariate Approaches using Bounded Innovation Propagation and Regression Quantiles Methodology

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  • Ewa Ratuszny

    ()
    (Warsaw School of Economics)

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    Abstract

    In the paper we present robust estimation methods based on bounded innovation propagation filters and quantile regression, applied to measure Value at Risk. To illustrate advantage connected with the robust methods, we compare VaR forecasts of several group of instruments in the period of high uncertainty on the financial markets with the ones modelled using traditional quasi-likelihood estimation. For comparative purpose we use three groups of tests i.e. based on Bernoulli trial models, on decision making aspect, and on the expected shortfall.

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    Bibliographic Info

    Article provided by CEJEME in its journal Central European Journal of Economic Modelling and Econometrics.

    Volume (Year): 5 (2013)
    Issue (Month): 1 (March)
    Pages: 35-63

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    Handle: RePEc:psc:journl:v:5:y:2013:i:1:p:35-63

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    Web page: http://cejeme.org/

    Related research

    Keywords: Robust estimation; quantile regression; CAViaR; ARMA-GARCH models;

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    1. Robin L. Lumsdaine & Serena Ng, 1998. "Testing for ARCH in the Presence of a Possibly Misspecified Conditional Mean," Boston College Working Papers in Economics 370, Boston College Department of Economics.
    2. Engle, Robert F & Manganelli, Simone, 1999. "CAViaR: Conditional Autoregressive Value at Risk by Regression Quantiles," University of California at San Diego, Economics Working Paper Series qt06m3d6nv, Department of Economics, UC San Diego.
    3. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
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    7. Paul H. Kupiec, 1995. "Techniques for verifying the accuracy of risk measurement models," Finance and Economics Discussion Series 95-24, Board of Governors of the Federal Reserve System (U.S.).
    8. Jacek Osiewalski & Anna Pajor, 2010. "Bayesian Value-at-Risk for a Portfolio: Multi- and Univariate Approaches Using MSF-SBEKK Models," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 2(4), pages 253-277, September.
    9. Jorion, Philippe, 1995. " Predicting Volatility in the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 50(2), pages 507-28, June.
    10. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    11. Grazyna Trzpiot & Justyna Majewska, 2008. "Investment decisions and portfolios classificationbased on robust methods of estimation," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 1, pages 83-96.
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