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Value-at-Risk for long and short trading positions: The case of the Athens Stock Exchange

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Author Info
Panayiotis Diamandis (Department of Business Administration, Athens University of Economics and Business)
Georgios Kouretas () (Department of Economics, University of Crete)
Leonidas Zarangas (Department of Finance and Auditing, Technological Educational Institute of Epirus)

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Abstract

This paper provides Value-at-Risk estimates for daily stock returns with the application of various parametric univariate models that belong to the class of ARCH models which are based on the skewed Student distribution. We use daily data for three stock indexes of the Athens Stock Exchange (ASE) and three stocks of Greek companies listed in the ASE. We conduct our analysis with the adoption of the methodology suggested by Giot and Laurent (2003). Therefore, we estimate an APARCH model based on the skewed Student distribution to fully take into account the fat left and right tails of the returns distribution. We show that the estimated VaR for traders having both long and short positions in the Athens Stock Exchange is more accurately modeled by a skewed Student APARCH model that by a normal or Student distributions.

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File URL: http://economics.soc.uoc.gr/wpa/docs/VaRLSTP.pdf
File Format: application/pdf
File Function: First version, 2006
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Publisher Info
Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0601.

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Length: 34 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:crt:wpaper:0601

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Related research
Keywords: Value-at-Risk; risk management; APARCH models; skewed Student distribution;

Find related papers by JEL classification:
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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  1. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September. [Downloadable!] (restricted)
  2. Pagan, Adrian R. & Schwert, G. William, 1990. "Alternative models for conditional stock volatility," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 267-290. [Downloadable!] (restricted)
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  3. Simone Manganelli & Robert F. Engle, 2001. "Value at risk models in finance," Working Paper Series 075, European Central Bank. [Downloadable!]
  4. Peter F. Christoffersen & Francis X. Diebold, 2000. "How Relevant is Volatility Forecasting for Financial Risk Management?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 12-22, February. [Downloadable!] (restricted)
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  5. Pierre Giot & Sébastien Laurent, 2003. "Value-at-risk for long and short trading positions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(6), pages 641-663. [Downloadable!]
    Other versions:
  6. Laurent, Sebastien & Peters, Jean-Philippe, 2002. " G@RCH 2.2: An Ox Package for Estimating and Forecasting Various ARCH Models," Journal of Economic Surveys, Blackwell Publishing, vol. 16(3), pages 447-85, July. [Downloadable!] (restricted)
    Other versions:
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