Asymmetric volatility effects in risk management: An empirical analysis using a stock index futures

Arbeitspapier

In this research paper ARCH-type models and option implied volatilities (IV) are applied in order to estimate the Value-at-Risk (VaR) of a stock index futures portfolio for several time horizons. The relevance of the asymmetries in the estimated volatility estimation is considered. The empirical analysis is performed on futures contracts of both the Standard and Poors 500 Index and the Mexican Stock Exchange. According to the results, the IV model is superior in terms of precision compared to the ARCH-type models. Under both methodologies there are relevant statistical gains when asymmetries are included. The referred gains range from 4 to around 150 basis points of minimum capital risk requirements. This research documents the importance of taking asymmetric effects (leverage effects) into account in volatility forecasts when it comes to risk management analysis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2020-10

Classification and Topics

• Classification: Wirtschaft ; Statistical Simulation Methods: General ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Forecasting Models; Simulation Methods ; Price Level; Inflation; Deflation ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
• Subject: Asymmetric volatility ; Backtesting ; GARCH ; TARCH ; Implied volatility ; Stock indexfutures ; Value at Risk ; Mexico

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Benavides, Guillermo
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/240699
• Last update: 10.03.2025, 11:44 AM CET