Consequences of the Euro introduction on Market Risk: An Econometric Evidence from 1995-2004
In the last years the interest in the Value at Risk (VaR) estimation has significantly growth due to international financial instability. We modelled the daily VaR estimation trough different static and non-static variance techniques in order to evaluate the changes produced in financial risk caused by the Euro introduction. Our analysis covers 10 European indices and neutral DJIA as a mirror for common world developments. Estimations are made on 1000 ex-ante and 1000 ex-post data points and backtested on the next 250 for each index by Kupiec’s (1995) methodology. At this stage of the ongoing research it is already clear that in general VaR has grown significantly after introducing Euro, which in turn claims for new commercial bank capital requirements according to Basle Accord. We also have shown how the non-static models are more suitable for the variance prediction.
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Volume (Year): 6 (2006)
Issue (Month): 2 ()
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- R.W.J. van den Goorbergh & P.J.G. Vlaar, 1999.
"Value-at-Risk analysis of stock returns: Historical simulation, varinace techniques or tail index estimation ?,"
WO Research Memoranda (discontinued)
579, Netherlands Central Bank, Research Department.
- R.W.J. van den Goorbergh & P.J.G. Vlaar, 1999. "Value-at-Risk Analysis of Stock Returns Historical Simulation,Variance Techniques or Tail Index Estimation?," DNB Staff Reports (discontinued) 40, Netherlands Central Bank.
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