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Value-at-Risk for long and short trading positions: The case of the Athens Stock Exchange

Author

Listed:
  • Panayiotis Diamandis

    (Department of Business Administration, Athens University of Economics and Business)

  • Georgios Kouretas

    (Department of Economics, University of Crete)

  • Leonidas Zarangas

    (Department of Finance and Auditing, Technological Educational Institute of Epirus)

Abstract

This paper provides Value-at-Risk estimates for daily stock returns with the application of various parametric univariate models that belong to the class of ARCH models which are based on the skewed Student distribution. We use daily data for three stock indexes of the Athens Stock Exchange (ASE) and three stocks of Greek companies listed in the ASE. We conduct our analysis with the adoption of the methodology suggested by Giot and Laurent (2003). Therefore, we estimate an APARCH model based on the skewed Student distribution to fully take into account the fat left and right tails of the returns distribution. We show that the estimated VaR for traders having both long and short positions in the Athens Stock Exchange is more accurately modeled by a skewed Student APARCH model that by a normal or Student distributions.

Suggested Citation

  • Panayiotis Diamandis & Georgios Kouretas & Leonidas Zarangas, 2006. "Value-at-Risk for long and short trading positions: The case of the Athens Stock Exchange," Working Papers 0601, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:0601
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    File URL: http://economics.soc.uoc.gr/wpa/docs/VaRLSTP.pdf
    File Function: First version, 2006
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    References listed on IDEAS

    as
    1. Peter F. Christoffersen & Francis X. Diebold, 2000. "How Relevant is Volatility Forecasting for Financial Risk Management?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 12-22, February.
    2. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
    3. Pagan, Adrian R. & Schwert, G. William, 1990. "Alternative models for conditional stock volatility," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 267-290.
    4. Pierre Giot & Sébastien Laurent, 2003. "Value-at-risk for long and short trading positions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(6), pages 641-663.
    5. Paul H. Kupiec, 1995. "Techniques for verifying the accuracy of risk measurement models," Finance and Economics Discussion Series 95-24, Board of Governors of the Federal Reserve System (U.S.).
    6. Laurent, Sebastien & Peters, Jean-Philippe, 2002. "G@RCH 2.2: An Ox Package for Estimating and Forecasting Various ARCH Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 447-485, July.
    7. S»bastien Laurent and Jean-Philippe Peters, 2001. "G@RCH 2.0: An Ox Package for Estimating and Forecasting Various ARCH Models," Computing in Economics and Finance 2001 123, Society for Computational Economics.
    8. Engle, Robert F. & Manganelli, Simone, 2001. "Value at risk models in finance," Working Paper Series 75, European Central Bank.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Degiannakis, Stavros & Floros, Christos & Livada, Alexandra, 2012. "Evaluating Value-at-Risk Models before and after the Financial Crisis of 2008: International Evidence," MPRA Paper 80463, University Library of Munich, Germany.

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    More about this item

    Keywords

    Value-at-Risk; risk management; APARCH models; skewed Student distribution;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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