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Forecasting Value-at-Risk using nonlinear regression quantiles and the intra-day range

  • Chen, Cathy W.S.
  • Gerlach, Richard
  • Hwang, Bruce B.K.
  • McAleer, Michael

Some novel nonlinear threshold conditional autoregressive VaR (CAViaR) models are proposed that incorporate intra-day price ranges. Model estimation is performed using a Bayesian approach via the link with the Skewed–Laplace distribution. The performances of a range of risk models during the 2008–09 financial crisis are examined, including an evaluation of the way in which the crisis affected the performance of VaR forecasting. An empirical analysis is conducted on five Asia-Pacific Economic Cooperation stock market indices and two exchange rate series. Standard back-testing criteria are used to measure and assess the forecast performances of a variety of risk models. The proposed threshold CAViaR model, incorporating range information, is shown to forecast VaR more effectively and more accurately than other models, across the series considered.

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Article provided by Elsevier in its journal International Journal of Forecasting.

Volume (Year): 28 (2012)
Issue (Month): 3 ()
Pages: 557-574

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Handle: RePEc:eee:intfor:v:28:y:2012:i:3:p:557-574
Contact details of provider: Web page: http://www.elsevier.com/locate/ijforecast

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  4. McAleer, M.J. & Jiménez-Martín, J.A. & Pérez-Amaral, T., 2012. "Has the Basel Accord Improved Risk Management During the Global Financial Crisis?," Econometric Institute Research Papers EI 2012-34, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
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  6. Juan-Ángel Jiménez-Martín & Michael McAleer & Teodosio Pérez-Amaral, 2009. "What Happened to Risk Management During the 2008-09 Financial Crisis?," Documentos de Trabajo del ICAE 0919, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
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