Analytic Approximations To VaR In a GARCH Framework

Stanescu, Silvia and Alexander, Carol and Lazar, Emese (2008) Analytic Approximations To VaR In a GARCH Framework. In: IX Workshop on Quantitative Finance, 24th - 25th January 2008, Rome, Italy. (Unpublished) (The full text of this publication is not available from this repository)

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Abstract

The forecasting ability of GARCH models has been the subject of numerous research papers. However, most papers consider only point variance forecasts. This paper shows how approximate predictive distributions for future cumulative returns can be constructed using the first four conditional moments of the returns generated by a GARCH process. An important application of these distributions is for Value-at-Risk (VaR) calculations. In fact simulations are not needed to evaluate the VaR of a portfolio with GARCH process returns over any time horizon. Our analytic formulae for the moments of cumulative returns distributions may be used instead. The empirical performance of this quasi-analytical method of computing VaR is assessed.

Item Type: Conference or workshop item (Other)
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Cathy Norman
Date Deposited: 09 Feb 2012 16:24
Last Modified: 09 Jun 2014 13:30
Resource URI: http://kar.kent.ac.uk/id/eprint/28689 (The current URI for this page, for reference purposes)
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