Nonparametric forward-looking value-at-risk
Författare
Summary, in English
This paper proposes a new model for computing value-at-risk forecasts. The model is fully nonparametric and easy to implement. Further, it incorporates information about the market's perceived uncertainty about the future. The forward-looking information is obtained from the option market via the Chicago Board Options Exchange's implied volatility index (VIX). Using S&P 500 data from 1990 to 2010 we find that the use of option implied volatility compares favorably with generalized autoregressive conditional heteroscedasticity (GARCH)-type models in terms of forecast performance. By comparing the model primarily used in the banking sector to our new model, we find that a financial institution using our model has on average a lower market induced capital requirement (MCR). However, during the time period leading up to the financial crisis our model gives a 40% higher MCR.
Avdelning/ar
Publiceringsår
2014
Språk
Engelska
Sidor
103-123
Publikation/Tidskrift/Serie
Journal of Risk
Volym
16
Issue
4
Länkar
Dokumenttyp
Artikel i tidskrift
Förlag
Risk Publications
Ämne
- Business Administration
Status
Published
ISBN/ISSN/Övrigt
- ISSN: 1465-1211