A conditional extreme value approach to value-at-risk estimation with exchangeable innovations
| Main Authors: | Huang, Chun-Kai (Karl), North, Delia, Zewotir, Temesgen |
|---|---|
| Format: | Proceeding |
| Bahasa: | eng |
| Terbitan: |
, 2016
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| Subjects: | |
| Online Access: |
https://zenodo.org/record/3358330 |
Daftar Isi:
- Extreme value theory (EVT) is commonly used for evaluating risk in financial returns. In particular, it can be amalgamated with a GARCH model, where the peaks-over-threshold (POT) method is applied to the innovations. However, this GARCH-EVT approach relies on the assumption that the innovations are independent and identically distributed. To relax this assumption, we generalise the POT method to exchangeable sequences. We apply this new approach, with the GARCH filter, to forecast one-day-ahead Value-at-Risk estimates for FTSE100 and ALSI daily returns. It showed significant improvements as compared to some standard methods.