Beyond Value at Risk for Developing Markets

19 Pages Posted: 1 Jun 2021

See all articles by Ibraheem Abiodun Yahayah

Ibraheem Abiodun Yahayah

Wroclaw University of Science and Technology; WorldQuant University

Monsur Bolaji Olowoyo

WorldQuant University

Ken Abbott

WorldQuant University

Date Written: May 28, 2021

Abstract

The standard metric for assessing risk in the financial realm has been the Value-at-Risk (VaR) with several parametric and non-parametric approaches and its derivatives which is Conditional Value-at-Risk (CVaR). The inability of VaR to tell loss severity beyond the confidence threshold and its incoherency gave birth to CVaR which accounted for both shortcomings and is also sub-additive. However, backtesting a 1-day CVaR model is almost impossible and VaR estimates gives better accuracy for fat tails than CVaR which makes CVaR also defective. Hence, there is need for a better measure which will capture the shortcomings of both metrics. This research will employ other risk measures beyond the conventional VaR and CVaR using the historical return of developing markets; South African Stock exchange (JTOPI-40) and the Nigerian Stock Exchange (NSE-30). In Particular, we will consider Hull-White Value-at-Risk (HWVaR) and Bubble Value-at-Risk (BVaR) and finally compare and contrast them with the two conventional metrics.

Keywords: Value-at-Risk; Conditional VaR; Hull-White VaR; Bubble VaR; Python; JTOPI 40, NSE-30.

JEL Classification: G11, G32

Suggested Citation

Yahayah, Ibraheem Abiodun and Olowoyo, Monsur Bolaji and Abbott, Ken, Beyond Value at Risk for Developing Markets (May 28, 2021). Available at SSRN: https://ssrn.com/abstract=3855643 or http://dx.doi.org/10.2139/ssrn.3855643

Ibraheem Abiodun Yahayah (Contact Author)

Wroclaw University of Science and Technology ( email )

wybrzeże Stanisława Wyspiańskiego 27, 50-370
Wrocław, 50-370
Poland
713202905 (Phone)
50-370 (Fax)

WorldQuant University ( email )

Place St Charles
201 St Charles Ave #2500
New Orleans, LA 70170
United States

Monsur Bolaji Olowoyo

WorldQuant University ( email )

Place St Charles
201 St Charles Ave #2500
New Orleans, LA 70170
United States
+2348161789879 (Phone)

Ken Abbott

WorldQuant University ( email )

Place St Charles
201 St Charles Ave #2500
New Orleans, LA 70170
United States

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