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Value-at-risk and extreme returns

Danielsson, Jon 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
Library of Congress subject classification: H Social Sciences > HG Finance
Sets: Research centres and groups > Financial Markets Group (FMG)
Departments > Finance
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 16 Jul 2009 11:25
URL: http://eprints.lse.ac.uk/7328/

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