The Quality of Value at Risk Via Univariate GARCH

19 Pages Posted: 5 Oct 2003

Date Written: October 10, 2002

Abstract

The estimation of value at risk using univariate GARCH models is examined. A long history of the S&P 500 is used to compare these estimators with several other common approaches to value at risk estimation. The test results indicate that GARCH estimates are superior to the other methods in terms of accuracy and consistency of the probability level. Although all of the GARCH models tested performed relatively well, the quality of the value at risk estimate does depend on which particular GARCH model is used. Weighting recent observations more heavily when fitting the GARCH model seems to be beneficial.

Suggested Citation

Burns, Patrick J., The Quality of Value at Risk Via Univariate GARCH (October 10, 2002). Available at SSRN: https://ssrn.com/abstract=443540 or http://dx.doi.org/10.2139/ssrn.443540

Patrick J. Burns (Contact Author)

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