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Parametric Estimation of Value at Risk

DEPENDENCE BETWEEN VOLATILITY PERSISTENCE, KURTOSIS AND DEGREES OF FREEDOM
Ante Rozga and Josip Arnerić,
Faculty of Economics, University of Split, Croatia

ABSTRACT
In this paper the dependence between volatility persistence, kurtosis and degrees of freedom from Student’s t-distribution will be presented in estimation alternative risk measures on simulated returns. As the most used measure of market risk is standard deviation of returns, i.e. volatility. However, based on volatility alternative
risk measures can be estimated, for example Value-at-Risk (VaR). There are many methodologies for calculating VaR, but for simplicity they can be classified into parametric and nonparametric models. In category of parametric models the GARCH(p,q) model is used for modeling time-varying variance of returns.

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Tags: asymptotix

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