The effects of risk modelling: assessing value-at-risk accuracy

This study examines Value-at-Risk (VaR) models that are integrated with several volatility representations to estimate the market risk for seven nonfinancial sectors traded on the first board of the Malaysian stock exchange. In a sample that spanned 19 years from1993 until 2012 for construction, con...

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Main Authors: Zatul Karamah Ahmad Baharul-Ulum, Ismail Ahmad, Norhana Salamudin, Norzaidi Mohd Daud
Format: Non-Indexed Article
Published: 2015
Online Access:http://discol.umk.edu.my/id/eprint/8099/
http://e-journal.um.edu.my/public/article-view.php?id=7857
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Institution: Universiti Malaysia Kelantan
id my.umk.eprints.8099
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spelling my.umk.eprints.80992022-05-23T10:25:16Z http://discol.umk.edu.my/id/eprint/8099/ The effects of risk modelling: assessing value-at-risk accuracy Zatul Karamah Ahmad Baharul-Ulum Ismail Ahmad Norhana Salamudin Norzaidi Mohd Daud This study examines Value-at-Risk (VaR) models that are integrated with several volatility representations to estimate the market risk for seven nonfinancial sectors traded on the first board of the Malaysian stock exchange. In a sample that spanned 19 years from1993 until 2012 for construction, consumer product, industrial product, plantation, property, trade and services and mining sectors, the expected maximum losses are quantified at 95% confidence level. For accuracy determination, assessments using Kupiec test and Christoffersen test have provided evidence that almost every model are found to be accurate for all sets of occurrence. However, using the Lopez test which takes into consideration the magnitude of the impact of exceptions, the most accurate model is the VaR which is integrated with GARCHt. This study found that fat tails and asymmetries are important issues that need to be considered when estimating VaR in managing financial risks. 2015 Non-Indexed Article NonPeerReviewed Zatul Karamah Ahmad Baharul-Ulum and Ismail Ahmad and Norhana Salamudin and Norzaidi Mohd Daud (2015) The effects of risk modelling: assessing value-at-risk accuracy. International Journal of Institutions and Economies, 7 (2). pp. 1-29. ISSN 2232-1349 http://e-journal.um.edu.my/public/article-view.php?id=7857
institution Universiti Malaysia Kelantan
building Perpustakaan Universiti Malaysia Kelantan
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Kelantan
content_source UMK Institutional Repository
url_provider http://umkeprints.umk.edu.my/
description This study examines Value-at-Risk (VaR) models that are integrated with several volatility representations to estimate the market risk for seven nonfinancial sectors traded on the first board of the Malaysian stock exchange. In a sample that spanned 19 years from1993 until 2012 for construction, consumer product, industrial product, plantation, property, trade and services and mining sectors, the expected maximum losses are quantified at 95% confidence level. For accuracy determination, assessments using Kupiec test and Christoffersen test have provided evidence that almost every model are found to be accurate for all sets of occurrence. However, using the Lopez test which takes into consideration the magnitude of the impact of exceptions, the most accurate model is the VaR which is integrated with GARCHt. This study found that fat tails and asymmetries are important issues that need to be considered when estimating VaR in managing financial risks.
format Non-Indexed Article
author Zatul Karamah Ahmad Baharul-Ulum
Ismail Ahmad
Norhana Salamudin
Norzaidi Mohd Daud
spellingShingle Zatul Karamah Ahmad Baharul-Ulum
Ismail Ahmad
Norhana Salamudin
Norzaidi Mohd Daud
The effects of risk modelling: assessing value-at-risk accuracy
author_facet Zatul Karamah Ahmad Baharul-Ulum
Ismail Ahmad
Norhana Salamudin
Norzaidi Mohd Daud
author_sort Zatul Karamah Ahmad Baharul-Ulum
title The effects of risk modelling: assessing value-at-risk accuracy
title_short The effects of risk modelling: assessing value-at-risk accuracy
title_full The effects of risk modelling: assessing value-at-risk accuracy
title_fullStr The effects of risk modelling: assessing value-at-risk accuracy
title_full_unstemmed The effects of risk modelling: assessing value-at-risk accuracy
title_sort effects of risk modelling: assessing value-at-risk accuracy
publishDate 2015
url http://discol.umk.edu.my/id/eprint/8099/
http://e-journal.um.edu.my/public/article-view.php?id=7857
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