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Estimating Value-at-Risk for the Turkish Stock Index Futures in the Presence of Long Memory Volatility

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  • Adnan Kasman

Abstract

This paper examines the long memory properties for closing prices of the Turkish stock index futures market using the FIGARCH(1,d,1) model with three different distributions : Normal, Student-t, and skewed Student-t. The value-at-risk (VaR) values are calculated using the estimated models. The results indicate strong evidence of long memory in volatility. The evidence of long memory in volatility shows that uncertainty or risk is an important determinant of the behavior of daily futures prices in the Turkish futures market. The empirical results further indicate that based on the Kupiec LR failure rate test the FIGARCH(1,d,1) models with skewed Student-t distribution perform better than those of generated by normal distribution.

Suggested Citation

  • Adnan Kasman, 2009. "Estimating Value-at-Risk for the Turkish Stock Index Futures in the Presence of Long Memory Volatility," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 9(1), pages 1-14.
    • Handle: RePEc:tcb:cebare:v:9:y:2009:i:1:p:1-14
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    File URL: http://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2009/Volume+9-1/
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    References listed on IDEAS

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    7. Yu Chuan Huang & Bor-Jing Lin, 2004. "Value-at-Risk Analysis for Taiwan Stock Index Futures: Fat Tails and Conditional Asymmetries in Return Innovations," Review of Quantitative Finance and Accounting, Springer, vol. 22(2), pages 79-95, March.
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    Cited by:

    1. Mustafa Demirel & Gazanfer Unal, 2020. "Applying multivariate-fractionally integrated volatility analysis on emerging market bond portfolios," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-29, December.
    2. Chaker Aloui & Hela BEN HAMIDA, 2015. "Estimation and Performance Assessment of Value-at-Risk and Expected Shortfall Based on Long-Memory GARCH-Class Models," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 65(1), pages 30-54, January.
    3. Mesut BALLIBEY & Serpil T RKYILMAZ, 2014. "Value-at-Risk Analysis in the Presence of Asymmetry and Long Memory: The Case of Turkish Stock Market," International Journal of Economics and Financial Issues, Econjournals, vol. 4(4), pages 836-848.

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    More about this item

    Keywords

    Value-at-Risk; FIGARCH; Long memory;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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