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Value at risk for a mixture of normal distributions: the use of quasi- Bayesian estimation techniques

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  • Subu Venkataraman

Abstract

This article proposes a methodology for measuring value at risk for fat-tailed asset return distributions. Simulation-based results indicate that this approach provides better estimates of risk than one based on the assumption that asset returns are normally distributed.

Suggested Citation

  • Subu Venkataraman, 1997. "Value at risk for a mixture of normal distributions: the use of quasi- Bayesian estimation techniques," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 21(Mar), pages 2-13.
    • Handle: RePEc:fip:fedhep:y:1997:i:mar:p:2-13:n:v.21no.2
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    References listed on IDEAS

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    1. Kim, Dongcheol & Kon, Stanley J, 1994. "Alternative Models for the Conditional Heteroscedasticity of Stock Returns," The Journal of Business, University of Chicago Press, vol. 67(4), pages 563-598, October.
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    3. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. "On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
    4. Jorion, Philippe, 1995. "Predicting Volatility in the Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 50(2), pages 507-528, June.
    5. Hamilton, James D, 1991. "A Quasi-Bayesian Approach to Estimating Parameters for Mixtures of Normal Distributions," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(1), pages 27-39, January.
    6. Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
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