How Accurate are Modern Value-at-Risk Estimators Derived from Extreme Value Theory?

Arbeitspapier

In this study, we compare the out-of-sample forecasting performance of several modern Value-at- Risk (VaR) estimators derived from extreme value theory (EVT). Specifically, in a multi-asset study covering 30 years of stock, bond, commodity and currency market data, we analyse the accuracy of the classic generalised Pareto peak over threshold approach and three recently proposed methods based on the Box-Cox transformation, L-moment estimation and the Johnson system of distributions. We find that, in their unconditional form, some of the estimators are acceptable under current regulatory assessment rules but none of them can continuously pass more advanced tests of forecasting accuracy. In their conditional forms, forecasting power is significantly increased and the Box-Cox method proves to be the most promising estimator. However, it is also important to stress that the traditional historical simulation approach, which is currently the most frequently used VaR estimator in commercial banks, can not only keep up with the EVT-based methods but occasionally even outperforms them (depending on the setting: unconditional vs. conditional). Thus, recent claims to generally replace this simple method by theoretically more advanced EVT-based methods may be premature.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 6288

Klassifikation und Themen

• Klassifikation: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; Portfolio Choice; Investment Decisions ; Financial Forecasting and Simulation
• Thema: value-at-risk ; extreme value theory ; historical simulation ; backtest ; financial crisis

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Auer, Benjamin R. ; Mögel, Benjamin
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/155530
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ