Predicting Tail-related Risk Measures: The Consequences of Using GARCH Filters for non-GARCH Data
AbstractWe investigate the consequences for value-at-risk and expected short-fall purposes of using a GARCH filter on various mis-specified processes. We show that careful investigation of the adequacy of the GARCH filter is necessary since under mis-specifications a GARCH filter appears to do more harm than good. Using an unconditional non filtered tail estimate appears to perform satisfactorily for dependent data with a degree of dependency corresponding to actual market conditions.
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Bibliographic InfoPaper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp115.
Date of creation: Jun 2004
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Extreme value theory; Value at Risk (VaR); Expected shortfall; GARCH; Markov switching; Jump diffusion; Backtesting.;
Other versions of this item:
- Jalal, Amine & Rockinger, Michael, 2008. "Predicting tail-related risk measures: The consequences of using GARCH filters for non-GARCH data," Journal of Empirical Finance, Elsevier, vol. 15(5), pages 868-877, December.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-CFN-2005-04-16 (Corporate Finance)
- NEP-ETS-2005-04-16 (Econometric Time Series)
- NEP-FIN-2005-04-16 (Finance)
- NEP-RMG-2005-04-16 (Risk Management)
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