Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Bayesian Confidence Interval for Value-at-Risk


Author Info

  • Contreras, P.
  • Satchell, S.E.
Registered author(s):


    This study assesses the accuracy of the value-at-risk estimate (VaR). On the basis of posterior distributions of the unknown population parameters, we develop a confidence interval for VaR that reflects the genuine information available about the portfolios for which the VaR is calculated. This approach is more accurate than that in Dowd (2000) as it avoids explaining the behaviour of the population parameters on the basis of distributions of sample parameters. We find that the accuracy of both the confidence interval and the VaR estimate depend more dramatically on the sample size than what Dowd’s results suggest. In addition, we not only find that the impact of the confidence level and the holding period at which the VaR is predicated are negligible compared to that of the sample size (as in Dowd), but also that the confidence interval is far from being symmetric.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    Bibliographic Info

    Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0348.

    as in new window
    Length: 23
    Date of creation: Nov 2003
    Date of revision:
    Handle: RePEc:cam:camdae:0348

    Note: EM
    Contact details of provider:
    Web page:

    Related research

    Keywords: Bayesian Statistics; Confidence Interval; Monte Carlo Simulations; Value-at-Risk;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Frost, Peter A. & Savarino, James E., 1986. "An Empirical Bayes Approach to Efficient Portfolio Selection," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(03), pages 293-305, September.
    2. Peter K. Cornelius, 2000. "Trade in Financial Services, Capital Flows, and the Value-at-Risk of Countries," The World Economy, Wiley Blackwell, vol. 23(5), pages 649-672, 05.
    3. Cornelius, Peter K., 2000. "Trade in financial services, capital flows, and the value-at-risk of countries," Research Notes 00-2, Deutsche Bank Research.
    4. Mark Britten-Jones, 1999. "The Sampling Error in Estimates of Mean-Variance Efficient Portfolio Weights," Journal of Finance, American Finance Association, vol. 54(2), pages 655-671, 04.
    5. Karolyi, G. Andrew, 1993. "A Bayesian Approach to Modeling Stock Return Volatility for Option Valuation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(04), pages 579-594, December.
    Full references (including those not matched with items on IDEAS)



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:cam:camdae:0348. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.