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Which GARCH model is best for Value-at-Risk?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2015 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The purpose of this thesis is to identify the best volatility model for Value-at-Risk(VaR) estimations. We estimate 1 % and 5 % VaR figures for Nordic indices andstocks by using two symmetrical and two asymmetrical GARCH models underdifferent error distributions. Out-of-sample volatility forecasts are produced usinga 500 day rolling window estimation on data covering January 2007 to December2014. The VaR estimates are thereafter evaluated through Kupiec’s test andChristoffersen’s test in order to find the best model. The results suggest thatasymmetrical models perform better than symmetrical models albeit the simpleARCH is often good enough for 1 % VaR estimates.

Place, publisher, year, edition, pages
2015. , 27 p.
Keyword [en]
Value-at-Risk, ARCH/GARCH forecasting, Backtesting, Kupiec test, Christoffersen test
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-244448OAI: oai:DiVA.org:uu-244448DiVA: diva2:788857
Subject / course
Economics
Educational program
Bachelor Programme in Business and Economics
Supervisors
Examiners
Available from: 2015-02-17 Created: 2015-02-16 Last updated: 2015-02-17Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf