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A Fast, Accurate Method for Value at Risk and Expected Shortfall

Author

Listed:
  • Jochen KRAUSE

    (University of Zurich)

  • Marc S. PAOLELLA

    (University of Zurich and Swiss Finance Institute)

Abstract

A fast method is developed for value at risk and expected shortfall prediction for univariate asset return time series exhibiting leptokurtosis, asymmetry, and conditional heteroskedasticity. It is based on a GARCH-type process driven by noncentral t innovations. While the method involves use of several shortcuts for speed, it performs admirably in terms of accuracy, and actually outperforms highly competitive models.

Suggested Citation

  • Jochen KRAUSE & Marc S. PAOLELLA, 2014. "A Fast, Accurate Method for Value at Risk and Expected Shortfall," Swiss Finance Institute Research Paper Series 14-40, Swiss Finance Institute.
  • Handle: RePEc:chf:rpseri:rp1440
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    File URL: http://ssrn.com/abstract=2448615
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    Cited by:

    1. Alexander, Carol & Lazar, Emese & Stanescu, Silvia, 2021. "Analytic moments for GJR-GARCH (1, 1) processes," International Journal of Forecasting, Elsevier, vol. 37(1), pages 105-124.

    More about this item

    Keywords

    GARCH; Mixture-Normal-GARCH; Noncentral t; Table Lookup;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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