Evaluation of Value-at-Risk Models Using Historical Data
32 Pages Posted: 11 Nov 2007
Date Written: April 1996
Recent studies have underscored the need for market participants to develop reliable methods of measuring risk. One increasingly popular technique is the use of "value-at-risk" models, which convey estimates of market risk for an entire portfolio in one number. The author explores how well these models actually perform by applying twelve value-at-risk approaches to 1,000 randomly chosen foreign exchange portfolios. Using nine criteria to evaluate model performance, he finds that the approaches generally capture the risk that they set out to assess and tend to produce risk estimates that are similar in average size. No approach, however, appears to be superior by every measure.
Keywords: value-at-risk, portfolio
JEL Classification: G11, G15, G28
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
How Accurate are Value-at-Risk Models at Commercial Banks
By Jeremy Berkowitz and James M. O'brien
The Predictive Ability of Several Models of Exchange Rate Volatility
By Kenneth D. West and Dongchul Cho
Improving GARCH Volatility Forecasts
Regulatory Evaluation of Value-at-Risk Model
Regulatory Evaluation of Value-at-Risk Models
The Hidden Dangers of Historical Simulation
Methods for Evaluating Value-at-Risk Estimates
Bank Capital and Value at Risk
By Patricia Jackson, David Maude, ...
Bank Capital Requirements for Market Risk: The Internal Models Approach
By Darryll Hendricks and Beverly Hirtle
Evaluating Value-at-Risk Models with Desk-Level Data
By Jeremy Berkowitz, Peter Christoffersen, ...