Value-at-risk and extreme returns

Danielsson, Jon ORCID: 0009-0006-9844-7960 and Vries, C. G. de (2000) Value-at-risk and extreme returns. Annales d'economie et de Statistique, 60 (Specia). pp. 236-269. ISSN 0769-489X

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Abstract

We propose a semi-parametric method for unconditional Value-at-Risk (VaR) evaluation. The largest risks are modelled parametrically, while smaller risks are captured by the non-parametric empirical distribution function. A comparison of methods on a portfolio of stock and option returns reveals that at the 5% level the RiskMetrics analysis is best, but for predictions of low probability worst outcomes, it strongly underpredicts the VaR while the semi-parametric method is the most accurate.

Item Type:	Article
Official URL:	http://www.pse.ens.fr/adres/index.html
Additional Information:	© 2000 Institut National de la Statistique et des Etudes Economiques
Divisions:	Financial Markets Group Finance
Subjects:	H Social Sciences > HG Finance
Date Deposited:	16 Jul 2009 11:25
Last Modified:	11 Dec 2024 22:18
URI:	http://eprints.lse.ac.uk/id/eprint/7328

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