Cai, X ORCID: 0000-0003-1398-3715, Kim, M ORCID: 0000-0002-5454-2257, Shin, Yongcheol and Zhang, Qi
(2019)
FARVaR: Functional Autoregressive Value-at-Risk.
Journal of Financial Econometrics, 17 (2).
pp. 284-337.
Text
Cai Kim Shin Zhang JFEC 2018.pdf - Author Accepted Manuscript Download (2MB) |
Abstract
Motivated by the stylized fact that intraday returns can provide additional information on the tail behavior of daily returns, we propose a functional autoregressive value-at-risk (VaR) approach which can directly incorporate such informational advantage into the daily VaR forecast. Our approach leads to greater flexibility in modeling the dynamic evolution of the density function of intraday returns and the ability to capture substantial swings in the tails following major events. We comprehensively evaluate our proposed model using intraday transaction data and demonstrate that it can improve coverage ability, reduce economic cost, and enhance statistical reliability in market risk management.
Item Type: | Article |
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Uncontrolled Keywords: | density forecasts, functional autoregressive model covariance, market risk management |
Depositing User: | Symplectic Admin |
Date Deposited: | 19 Oct 2018 09:23 |
Last Modified: | 19 Jan 2023 01:14 |
DOI: | 10.1093/jjfinec/nby031 |
Related URLs: | |
URI: | https://livrepository.liverpool.ac.uk/id/eprint/3027761 |