On the Appropriateness of Inappropriate VaR Models
AbstractThe Value-at-Risk calculation reduces the dimensionality of the risk factor space. The main reasons for such simplifications are, e.g., technical efficiency, the logic and statistical appropriateness of the model. In Chapter 2 we present three simple mappings: the mapping on the market index, the principal components model and the model with equally correlated risk factors. The comparison of these models in Chapter 3 is based on the literatere on the verification of weather forecasts (Murphy and Winkler 1992, Murphy 1997). Some considerations on the quantitative analysis are presented in the fourth chapter. In the last chapter, we present empirical analysis of the DAX data using XploRe.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-003.
Length: 26 pages
Date of creation: Jan 2006
Date of revision:
Value-at-Risk; market index model; principal components; random effects model; probability forecast;
Other versions of this item:
- Wolfgang Härdle & Zdeněk Hlávka & Gerhard Stahl, 2006. "On the appropriateness of inappropriate VaR models," AStA Advances in Statistical Analysis, Springer, vol. 90(2), pages 273-297, June.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- G20 - Financial Economics - - Financial Institutions and Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-FIN-2006-01-24 (Finance)
- NEP-FOR-2006-01-24 (Forecasting)
- NEP-RMG-2006-01-24 (Risk Management)
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.:
- Murphy, Allan H. & Winkler, Robert L., 1992. "Diagnostic verification of probability forecasts," International Journal of Forecasting, Elsevier, vol. 7(4), pages 435-455, March.
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