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Forecasting VaR using Analytic Higher Moments for GARCH Processes

Alexander, Carol, Lazar, Emese, Stanescu, Silvia (2013) Forecasting VaR using Analytic Higher Moments for GARCH Processes. International Review of Financial Analysis, 30 . pp. 36-45. ISSN 1057-5219. (doi:10.1016/j.irfa.2013.05.006) (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)

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. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1016/j.irfa.2013.05.006

Abstract

It is widely accepted that some of the most accurate Value-at-Risk (VaR) estimates are based on an appropriately specified GARCH process. But when the forecast horizon is greater than the frequency of the GARCH model, such predictions have typically required time-consuming simulations of the aggregated returns distributions. This paper shows that fast, quasi-analytic GARCH VaR calculations can be based on new formulae for the first four moments of aggregated GARCH returns. Our extensive empirical study compares the Cornish–Fisher expansion with the Johnson SU distribution for fitting distributions to analytic moments of normal and Student t, symmetric and asymmetric (GJR) GARCH processes to returns data on different financial assets, for the purpose of deriving accurate GARCH VaR forecasts over multiple horizons and significance levels.

Item Type: Article
DOI/Identification number: 10.1016/j.irfa.2013.05.006
Uncontrolled keywords: GARCH; Higher conditional moments; Approximate predictive distributions; Value-at-Risk; S&P 500; Treasury bill rate; Euro–US dollar exchange rate
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Cathy Norman
Date Deposited: 01 Jul 2013 15:29 UTC
Last Modified: 29 May 2019 10:20 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/34478 (The current URI for this page, for reference purposes)
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