Value-at-Risk: a multivariate switching regime approach
نویسندگان
چکیده
This paper analyses the application of a switching volatility model to forecast the Ž . distribution of returns and to estimate the Value-at-Risk VaR of both single assets and portfolios. We calculate the VaR value for 10 Italian stocks and a number of portfolios based on these stocks. The calculated VaR values are also compared with the variance–coŽ . variance approach used by JP Morgan in RiskMetricse and GARCH 1,1 models. Under backtesting, the VaR values calculated using the switching regime beta model are preferred w to both other methods. The Proportion of Failure and Time Until First Failure tests The Ž . x Journal of Derivatives 1995 73–84 confirm this result. q 2000 Elsevier Science B.V. All rights reserved. JEL classification: C22; C52; G28
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