A Fast, Accurate Method for Value at Risk and Expected Shortfall
37 Pages Posted: 12 Jun 2014
Date Written: June 11, 2014
A fast method is developed for value at risk and expected shortfall prediction for univariate asset return time series exhibiting leptokurtosis, asymmetry, and conditional heteroskedasticity. It is based on a GARCH-type process driven by noncentral t innovations. While the method involves use of several shortcuts for speed, it performs admirably in terms of accuracy, and actually outperforms highly competitive models.
Keywords: GARCH; Mixture-Normal-GARCH; Noncentral t; Table Lookup
JEL Classification: C51; C53; G11; G17
Suggested Citation: Suggested Citation