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GARCH-class models estimations and value-at-risk analysis for exchange rate

Author

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  • Samir Mabrouk
  • Chaker Aloui

Abstract

In this paper, we focus on three daily exchange rate returns dynamics. Indeed, we have assessed five GARCH-class models under three alternative distributions. Our findings confirm that the skewed Student-t FIAPARCH model performs very well. Then, we have computed short and long Value-at-Risk and Expected Shortfall based on AR (1) – FIAPARCH under normal, Student-t and skewed Student-t distributions. More precisely, we have investigated the estimation performance by computing both In-sample and Out-of-sample VaR for one-day-ahead horizon. Results reveal that VaR and ES estimations based on skewed Student-t FIAPARCH models outperform other models for both long and short trading positions.

Suggested Citation

  • Samir Mabrouk & Chaker Aloui, 2011. "GARCH-class models estimations and value-at-risk analysis for exchange rate," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 4(3), pages 254-278.
    • Handle: RePEc:ids:ijmefi:v:4:y:2011:i:3:p:254-278
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    Cited by:

    1. Leonard Arvi & Herman Manakyan & Kashi Khazeh, 2023. "Estimated Impact of Covid-19 on Exchange Rate Risk of Multinational Enterprises Operating in Emerging Markets," International Journal of Economics and Financial Issues, Econjournals, vol. 13(4), pages 23-29, July.
    2. Andrés Herrera Aramburú & Gabriel Rodríguez, 2016. "Volatility of stock market and exchange rate returns in Peru: Long memory or short memory with level shifts?," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 9(1), pages 45-66.

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