Out of Sample Value-at-Risk and Backtesting with the Standardized Pearson Type-IV Skewed Distribution
AbstractThis paper studies the efficiency of an econometric model where the volatility is modeled by a GARCH (1,1) process, and the innovations follow a standardized form of the Pearson type-IV distribution. The performance of the model is examined by in sample and out of sample testing, and the accuracy is explored by a variety of Value-at-Risk methods, the success/failure ratio, the Kupiec-LR test, the independence and conditional coverage tests of Christoffersen, the expected shortfall measures, and the dynamic quantile test of Engle and Manganelli. Overall, the proposed model is a valid and accurate model performing better than the skewed Student-t distribution, providing the financial analyst with a good candidate as an alternative distributional scheme.
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Bibliographic InfoArticle provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.
Volume (Year): 60 (2013)
Issue (Month): 2 (April)
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Web page: http://www.panoeconomicus.rs/
Value-at-Risk; Econometric modeling; GARCH; Pearson type-IV distribution;
Find related papers by JEL classification:
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
- C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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