Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87339
Authors: 
Jimenez-Martin, Juan-Angel
McAleer, Michael
Amaral, Teodosio Perez
Santos, Paulo Araujo
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-070/III
Abstract: 
In this paper we provide further evidence on the suitability of the median of the point VaR forecasts of a set of models as a GFC-robust strategy by using an additional set of new extreme value forecasting models and by extending the sample period for comparison. These extreme value models include DPOT and Conditional EVT. Such models might be expected to be useful in explaining financial data, especially in the presence of extreme shocks that arise during a GFC. Our empirical results confirm that the median remains GFC-robust even in the presence of these new extreme value models. This is illustrated by using the S&P500 index before, during and after the 2008-09 GFC. We investigate the performance of a variety of single and combined VaR forecasts in terms of daily capital requirements and violation penalties under the Basel II Accord, as well as other criteria, including several tests for independence of the violations. The strategy based on the median, or more generally, on combined forecasts of single models, is straightforward to incorporate into existing computer software packages that are used by banks and other financial institutions.
Subjects: 
Value-at-Risk (VaR)
DPOT
daily capital charges
robust forecasts
violation penalties
optimizing strategy
aggressive risk management
conservative risk management
Basel
global financial crisis
JEL: 
G32
G11
G17
C53
C22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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