Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/25248 
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dc.contributor.authorHärdle, Wolfgang Karlen
dc.contributor.authorMungo, Juliusen
dc.date.accessioned2008-02-21-
dc.date.accessioned2009-07-23T15:03:31Z-
dc.date.available2009-07-23T15:03:31Z-
dc.date.issued2008-
dc.identifier.urihttp://hdl.handle.net/10419/25248-
dc.description.abstractEmpirical studies have shown that a large number of financial asset returns exhibit fat tails and are often characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in market volatility, with significant impact on pricing and forecasting of market volatility. The implication is that models that accomodate long memory hold the promise of improved long-run volatility forecast as well as accurate pricing of long-term contracts. On the other hand, recent focus is on whether long memory can affect the measurement of market risk in the context of Value-at- Risk (V aR). In this paper, we evaluate the Value-at-Risk (V aR) and Expected Shortfall (ESF) in financial markets under such conditions. We examine one equity portfolio, the British FTSE100 and three stocks of the German DAX index portfolio (Bayer, Siemens and Volkswagen). Classical V aR estimation methodology such as exponential moving average (EMA) as well as extension to cases where long memory is an inherent characteristics of the system are investigated. In particular, we estimate two long memory models, the Fractional Integrated Asymmetric Power-ARCH and the Hyperbolic-GARCH with different error distribution assumptions. Our results show that models that account for asymmetries in the volatility specifications as well as fractional integrated parametrization of the volatility process, perform better in predicting the one-step as well as five-step ahead V aR and ESF for short and long positions than short memory models. This suggests that for proper risk valuation of options, the degree of persistence should be investigated and appropriate models that incorporate the existence of such characteristic be taken into account.en
dc.language.isoengen
dc.publisher|aHumboldt University of Berlin, Collaborative Research Center 649 - Economic Risk |cBerlinen
dc.relation.ispartofseries|aSFB 649 Discussion Paper |x2008,006en
dc.subject.jelC14en
dc.subject.jelC32en
dc.subject.jelC52en
dc.subject.jelC53en
dc.subject.jelG12en
dc.subject.ddc330en
dc.subject.keywordBacktestingen
dc.subject.keywordValue-at-Risken
dc.subject.keywordExpected Shortfallen
dc.subject.keywordLong Memoryen
dc.subject.keywordFractional Integrated Volatility Modelsen
dc.subject.stwValue at Risken
dc.subject.stwZeitreihenanalyseen
dc.subject.stwBörsenkursen
dc.subject.stwVolatilitäten
dc.subject.stwARCH-Modellen
dc.subject.stwTheorieen
dc.subject.stwSchätzungen
dc.subject.stwAktienindexen
dc.subject.stwGroßbritannienen
dc.subject.stwDeutschlanden
dc.titleValue-at-risk and expected shortfall when there is long range dependence-
dc.type|aWorking Paperen
dc.identifier.ppn558749348en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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