Do Not Torture the Data, Just…Listen to Them: An Alternative Value at Risk Approach

28 Pages Posted: 21 May 2020

See all articles by Evangelos Vasileiou

Evangelos Vasileiou

Department of Financial and Management Engineering

Date Written: April 11, 2020

Abstract

Even though econometric and technological advances have contributed to the vast risk modelling literature, practitioners in most cases use the simplest and most conventional approaches in order to avoid algorithmic complexity and increased costs. In this study we present a new approach which adopts a volatility-based filtering data approach, and uses only the most representative data in order to achieve more accurate VaR estimations than the conventional historical VaR models do. In simple words, the Filtering Historical VaR method, listens to the market’s previously documented behavior and presents more accurate than the conventional approaches VaR estimations.

Keywords: Value-at-Risk; Filtering Models; Accuracy; Emerging Markets; Empirical Risk Estimations

JEL Classification: G01; G15; G32; D81

Suggested Citation

Vasileiou, Evangelos, Do Not Torture the Data, Just…Listen to Them: An Alternative Value at Risk Approach (April 11, 2020). Available at SSRN: https://ssrn.com/abstract=3573747 or http://dx.doi.org/10.2139/ssrn.3573747

Evangelos Vasileiou (Contact Author)

Department of Financial and Management Engineering ( email )

45, Kountourgiotou str.
Chios, GA 82100
Greece

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