Empirical comparison of extreme value theory vis-À-vis other methods of VaR estimation using ASEAN+3 exchange rates

This study applies Extreme Value Theory in calculating Value-at-Risk (VaR) of portfolios consisting of foreign exchange exposures of ASEAN+3 countries. This paper addresses the issue that traditional VaR models assume normality of the return distribution. Empirical evidence confirms the stylized fac...

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Main Authors: Rufino, Cesar C., de Guia, Emmanuel G.
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Published: Animo Repository 2011
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Online Access:https://animorepository.dlsu.edu.ph/faculty_research/37
https://animorepository.dlsu.edu.ph/context/faculty_research/article/1036/type/native/viewcontent/ber.v20i2.1910
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spelling oai:animorepository.dlsu.edu.ph:faculty_research-10362024-05-03T05:08:53Z Empirical comparison of extreme value theory vis-À-vis other methods of VaR estimation using ASEAN+3 exchange rates Rufino, Cesar C. de Guia, Emmanuel G. This study applies Extreme Value Theory in calculating Value-at-Risk (VaR) of portfolios consisting of foreign exchange exposures of ASEAN+3 countries. This paper addresses the issue that traditional VaR models assume normality of the return distribution. Empirical evidence confirms the stylized facts that financial asset returns are typically negatively skewed and fat-tailed. Moreover, risk management concerns itself with the distribution of the tails, or events in the extremes of the distribution. Estimation of magnitude and the likelihood of extreme events should be given greater attention than central tendency characteristics. Thus, this paper proposes the application of Extreme Value Theory in computing an "Extreme VaR" to directly focus on the behavior of the tail of return distribution. The modeling is done on daily exchange rates returns of ASEAN+3 countries from January 24, 2004 to January 31, 2010. © 2011 De La Salle University, Philippines. 2011-01-01T08:00:00Z text text/html https://animorepository.dlsu.edu.ph/faculty_research/37 info:doi/10.3860/ber.v20i2.1910 https://animorepository.dlsu.edu.ph/context/faculty_research/article/1036/type/native/viewcontent/ber.v20i2.1910 Faculty Research Work Animo Repository Financial risk Extreme value theory Foreign exchange Business
institution De La Salle University
building De La Salle University Library
continent Asia
country Philippines
Philippines
content_provider De La Salle University Library
collection DLSU Institutional Repository
topic Financial risk
Extreme value theory
Foreign exchange
Business
spellingShingle Financial risk
Extreme value theory
Foreign exchange
Business
Rufino, Cesar C.
de Guia, Emmanuel G.
Empirical comparison of extreme value theory vis-À-vis other methods of VaR estimation using ASEAN+3 exchange rates
description This study applies Extreme Value Theory in calculating Value-at-Risk (VaR) of portfolios consisting of foreign exchange exposures of ASEAN+3 countries. This paper addresses the issue that traditional VaR models assume normality of the return distribution. Empirical evidence confirms the stylized facts that financial asset returns are typically negatively skewed and fat-tailed. Moreover, risk management concerns itself with the distribution of the tails, or events in the extremes of the distribution. Estimation of magnitude and the likelihood of extreme events should be given greater attention than central tendency characteristics. Thus, this paper proposes the application of Extreme Value Theory in computing an "Extreme VaR" to directly focus on the behavior of the tail of return distribution. The modeling is done on daily exchange rates returns of ASEAN+3 countries from January 24, 2004 to January 31, 2010. © 2011 De La Salle University, Philippines.
format text
author Rufino, Cesar C.
de Guia, Emmanuel G.
author_facet Rufino, Cesar C.
de Guia, Emmanuel G.
author_sort Rufino, Cesar C.
title Empirical comparison of extreme value theory vis-À-vis other methods of VaR estimation using ASEAN+3 exchange rates
title_short Empirical comparison of extreme value theory vis-À-vis other methods of VaR estimation using ASEAN+3 exchange rates
title_full Empirical comparison of extreme value theory vis-À-vis other methods of VaR estimation using ASEAN+3 exchange rates
title_fullStr Empirical comparison of extreme value theory vis-À-vis other methods of VaR estimation using ASEAN+3 exchange rates
title_full_unstemmed Empirical comparison of extreme value theory vis-À-vis other methods of VaR estimation using ASEAN+3 exchange rates
title_sort empirical comparison of extreme value theory vis-à-vis other methods of var estimation using asean+3 exchange rates
publisher Animo Repository
publishDate 2011
url https://animorepository.dlsu.edu.ph/faculty_research/37
https://animorepository.dlsu.edu.ph/context/faculty_research/article/1036/type/native/viewcontent/ber.v20i2.1910
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