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Analytic Approximations To GARCH Aggregated Returns Distributions With Applications To VaR and ETL

Alexander, Carol, Lazar, Emese, Stanescu, Silvia (2011) Analytic Approximations To GARCH Aggregated Returns Distributions With Applications To VaR and ETL. In: Proceedings of the 18th Forecasting Financial Markets Conference, 25th, 26th, 27th May 2011, Marseille, France. (doi:10.2139/ssrn.1832386) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:28652)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
Official URL:
https://doi.org/10.2139/ssrn.1832386

Abstract

It is widely accepted that some of the most accurate predictions of aggregated asset returns are based on an appropriately specified GARCH process. As the forecast horizon is greater than the frequency of the GARCH model, such predictions either require time-consuming simulations or they can be approximated using a recent development in the GARCH literature, viz. analytic conditional moment

formulae for GARCH aggregated returns. We demonstrate that this methodology yields robust and rapid calculations of the Value-at-Risk (VaR) generated by a GARCH process. Our extensive empirical study applies Edgeworth and Cornish-Fisher expansions and Johnson SU distributions, combined with normal and Student t, symmetric and asymmetric (GJR) GARCH processes to returns data on

different financial assets; it validates the accuracy of the analytic approximations to GARCH aggregated returns and derives GARCH VaR estimates that are shown to be highly accurate over multiple horizons and significance levels.

Item Type: Conference or workshop item (Paper)
DOI/Identification number: 10.2139/ssrn.1832386
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Divisions > Kent Business School - Division > Kent Business School (do not use)
Depositing User: Catherine Norman
Date Deposited: 06 Feb 2012 16:21 UTC
Last Modified: 09 Mar 2023 11:32 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/28652 (The current URI for this page, for reference purposes)

University of Kent Author Information

Stanescu, Silvia.

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