An optimization process in Value‐at‐Risk estimation

Review of Financial Economics - Tập 19 - Trang 109-116 - 2010
Alex YiHou Huang1
1Department of Finance, Yuan Ze University, 135 Yuan-Tung Road, Chung-Li, Taoyuan 320, Taiwan, ROC

Tóm tắt

AbstractA new method is proposed to estimate Value‐at‐Risk (VaR) by Monte Carlo simulation with optimal back‐testing results. The Monte Carlo simulation is adjusted through an iterative process to accommodate recent shocks, thereby taking into account the latest market conditions. Empirical validation covering the current financial crisis shows that VaR estimation via the optimization process is relatively reliable and consistent, and generally outperforms the VaR generated by a simple Monte Carlo simulation. This is particularly true in cases when the out‐of‐sample evaluation sample spans a lengthy period, as the traditional method tends to underestimate the number of extreme shocks.

Tài liệu tham khảo

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