IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/5610.html
   My bibliography  Save this paper

Violation duration as a better way of VaR model evaluation : evidence from Turkish market portfolio

Author

Listed:
  • Kilic, Ekrem

Abstract

Financial crisis those we have been experienced during last two decades encouraged the efforts of both academicians and the market participants to develop clear representations of the risk exposure of a �nancial institute. As a useful tool for measuring market risk of a portfolio, Value-at-Risk has emerged as the standard. However, there are several alternative Value-at-Risk implementations which may pro- duce signi�cantly di¤erent Value-at-Risk forecasts. Thus, evaluation of Value-at-Risk forecasts is as crucial as VaR itself. In this paper I will use the methodology which has described by Christoffersen and Pelletier[6] and I extended the methodology to create duration based analogous of unconditional coverage, conditional coverage and inde- pendence tests. I evaluated 14 Value-at-Risk implementation by using a Turkish Market portfolio which contain foreing currency, stock and bonds.

Suggested Citation

  • Kilic, Ekrem, 2006. "Violation duration as a better way of VaR model evaluation : evidence from Turkish market portfolio," MPRA Paper 5610, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:5610
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/5610/1/MPRA_paper_5610.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jose A. Lopez, 1999. "Methods for evaluating value-at-risk estimates," Economic Review, Federal Reserve Bank of San Francisco, pages 3-17.
    2. Peter Christoffersen, 2004. "Backtesting Value-at-Risk: A Duration-Based Approach," Journal of Financial Econometrics, Oxford University Press, vol. 2(1), pages 84-108.
    3. Peter Christoffersen & Jinyong Hahn & Atsushi Inoue, 1999. "Testing, Comparing, and Combining Value at Risk Measures," Center for Financial Institutions Working Papers 99-44, Wharton School Center for Financial Institutions, University of Pennsylvania.
    4. Jon Danielsson & Casper G. de Vries, 1998. "Beyond the Sample: Extreme Quantile and Probability Estimation," FMG Discussion Papers dp298, Financial Markets Group.
    5. Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August.
    6. Ekrem Kilic, 2005. "Forecasting Volatility of Turkish Markets: A Comparison of Thin and Thick Models," Econometrics 0510007, University Library of Munich, Germany.
    7. Pagan,Adrian & Ullah,Aman, 1999. "Nonparametric Econometrics," Cambridge Books, Cambridge University Press, number 9780521355643.
    8. 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.).
    9. Christoffersen, Peter & Hahn, Jinyong & Inoue, Atsushi, 2001. "Testing and comparing Value-at-Risk measures," Journal of Empirical Finance, Elsevier, vol. 8(3), pages 325-342, July.
    10. Susan Thomas & Mandira Sarma & Ajay Shah, 2003. "Selection of Value-at-Risk models," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 22(4), pages 337-358.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chrétien, Stéphane & Coggins, Frank, 2010. "Performance and conservatism of monthly FHS VaR: An international investigation," International Review of Financial Analysis, Elsevier, vol. 19(5), pages 323-333, December.
    2. Wagner Piazza Gaglianone & Luiz Renato Lima & Oliver Linton & Daniel R. Smith, 2011. "Evaluating Value-at-Risk Models via Quantile Regression," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 150-160, January.
    3. Abdul Hakim, 2009. "Forcasting portofolio value-at-risk for international stocks, bonds, and foreign exchange emerging market evidence," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 1(1), pages 13-26, April.
    4. Nieto, Maria Rosa & Ruiz, Esther, 2016. "Frontiers in VaR forecasting and backtesting," International Journal of Forecasting, Elsevier, vol. 32(2), pages 475-501.
    5. Gaglianone, Wagner Piazza & Marins, Jaqueline Terra Moura, 2017. "Evaluation of exchange rate point and density forecasts: An application to Brazil," International Journal of Forecasting, Elsevier, vol. 33(3), pages 707-728.
    6. Carol Alexander & Jose Maria Sarabia, 2010. "Endogenizing Model Risk to Quantile Estimates," ICMA Centre Discussion Papers in Finance icma-dp2010-07, Henley Business School, University of Reading.
    7. da Veiga, Bernardo & Chan, Felix & McAleer, Michael, 2008. "Evaluating the impact of market reforms on Value-at-Risk forecasts of Chinese A and B shares," Pacific-Basin Finance Journal, Elsevier, vol. 16(4), pages 453-475, September.
    8. Abad, Pilar & Benito, Sonia, 2013. "A detailed comparison of value at risk estimates," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 94(C), pages 258-276.
    9. Barbara Będowska-Sójka, 2018. "Is intraday data useful for forecasting VaR? The evidence from EUR/PLN exchange rate," Risk Management, Palgrave Macmillan, vol. 20(4), pages 326-346, November.
    10. Chiu, Yen-Chen & Chuang, I-Yuan, 2016. "The performance of the switching forecast model of value-at-risk in the Asian stock markets," Finance Research Letters, Elsevier, vol. 18(C), pages 43-51.
    11. Krzysztof Echaust & Małgorzata Just, 2021. "Tail Dependence between Crude Oil Volatility Index and WTI Oil Price Movements during the COVID-19 Pandemic," Energies, MDPI, vol. 14(14), pages 1-21, July.
    12. Li, Leon, 2017. "Testing and comparing the performance of dynamic variance and correlation models in value-at-risk estimation," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 116-135.
    13. Nieto, María Rosa & Ruiz Ortega, Esther, 2008. "Measuring financial risk : comparison of alternative procedures to estimate VaR and ES," DES - Working Papers. Statistics and Econometrics. WS ws087326, Universidad Carlos III de Madrid. Departamento de Estadística.
    14. Hamidreza Arian & Hossein Poorvasei & Azin Sharifi & Shiva Zamani, 2020. "The Uncertain Shape of Grey Swans: Extreme Value Theory with Uncertain Threshold," Papers 2011.06693, arXiv.org.
    15. Escanciano, J. C. & Olmo, J., 2007. "Estimation risk effects on backtesting for parametric value-at-risk models," Working Papers 07/11, Department of Economics, City University London.
    16. Braione, Manuela & Scholtes, Nicolas K., 2014. "Construction of value-at-risk forecasts under different distributional assumptions within a BEKK framework," LIDAM Discussion Papers CORE 2014059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    17. Kakade, Kshitij & Jain, Ishan & Mishra, Aswini Kumar, 2022. "Value-at-Risk forecasting: A hybrid ensemble learning GARCH-LSTM based approach," Resources Policy, Elsevier, vol. 78(C).
    18. Boucher, Christophe M. & Daníelsson, Jón & Kouontchou, Patrick S. & Maillet, Bertrand B., 2014. "Risk models-at-risk," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 72-92.
    19. Fiszeder, Piotr & Fałdziński, Marcin & Molnár, Peter, 2023. "Modeling and forecasting dynamic conditional correlations with opening, high, low, and closing prices," Journal of Empirical Finance, Elsevier, vol. 70(C), pages 308-321.
    20. M. Hashem Pesaran & Paolo Zaffaroni, 2004. "Model Averaging and Value-at-Risk Based Evaluation of Large Multi Asset Volatility Models for Risk Management," CESifo Working Paper Series 1358, CESifo.

    More about this item

    Keywords

    Value-at-Risk; model evaluation; conditional cover- age; duration based coverage testing;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:5610. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.