Global Financial Crisis and VaR Performance in Emerging Markets: A Case of EU Candidate States - Turkey and Croatia
Zbornik radova Ekonomskog fakulteta u Rijeci, časopis za ekonomsku teoriju i praksu - Proceedings of Rijeka Faculty of Economics, Journal of Economics and Business, Vol. 27, No. 1, 2009, pp. 149-170
22 Pages Posted: 22 May 2013
Date Written: June 29, 2009
We investigate the relative performance of a wide array of Value at Risk (VaR) models with the daily returns of Turkish (XU100) and Croatian (CROBEX) stock index prior to and during the ongoing financial crisis. In addition to widely used VaR models, we also study the behaviour of conditional and unconditional extreme value theory (EVT) and hybrid historical simulation (HHS) models to generate 95, 99 and 99.5% confidence level estimates. Results indicate that during the crisis period all tested VaR model except EVT and HHS models seriously under-predict the true level of risk, with EVT models doing so at a higher cost of capital compared to HHS model.
Keywords: financial crisis, emerging markets, Value at Risk, extreme value theory, hybrid historical simulation
JEL Classification: G24, C14, C22, C52, C53
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