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Market Risk Management for Emerging Markets: Evidence from Russian Stock Market

EMERGING MARKETS: PERFORMANCE, ANALYSIS AND INNOVATION, Chapman & Hall / CRC Finance, pp. 533-554, 2009

45 Pages Posted: 2 Sep 2009 Last revised: 23 Dec 2011

Dean Fantazzini

Moscow School of Economics, Moscow State University; National Research University Higher School of Economics

Date Written: September 2, 2009

Abstract

This study investigates market risk management methods for high dimensional portfolios composed of Russian stocks. We employ a general copula framework that allows for flexible marginal distributions, as well as different types of dependence represented by the copula function. We compare different multivariate distribution assumptions by measuring the Value at Risk for a portfolio composed of thirty Russian stocks and using various back-testing techniques. Our empirical results point out at the importance of marginal leptokurtosis while the type of copulas plays a minor role. Besides, we find that marginal misspecification may result in significant misspecified dependence structures with important consequences on VaR estimation

Keywords: Multivariate Modelling, GARCH, Normal copula, Grouped T Copula, T copula, Dynamic Conditional Correlation, VaR, Forecasting, Backtesting

JEL Classification: C15, C32, C53

Suggested Citation

Fantazzini, Dean, Market Risk Management for Emerging Markets: Evidence from Russian Stock Market (September 2, 2009). EMERGING MARKETS: PERFORMANCE, ANALYSIS AND INNOVATION, Chapman & Hall / CRC Finance, p. 533-554, 2009. Available at SSRN: https://ssrn.com/abstract=1466697

Dean Fantazzini (Contact Author)

Moscow School of Economics, Moscow State University ( email )

GSP-2, Leninskie Gory
Moscow, 119992
Russia
+7 495 5105256 (Phone)
+7 495 5105267 (Fax)

HOME PAGE: https://sites.google.com/site/deanfantazzini/

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

HOME PAGE: http://www.hse.ru/org/persons/11532644

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