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A Fast, Accurate Method for Value-at-Risk and Expected Shortfall

Department of Banking and Finance, University of Zurich, CH-8032 Zurich, Switzerland
Swiss Finance Institute, CH-8006 Zurich, Switzerland
Author to whom correspondence should be addressed.
Econometrics 2014, 2(2), 98-122;
Received: 5 June 2014 / Revised: 21 June 2014 / Accepted: 22 June 2014 / Published: 25 June 2014
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A fast method is developed for value-at-risk and expected shortfall prediction for univariate asset return time series exhibiting leptokurtosis, asymmetry and conditional heteroskedasticity. It is based on a GARCH-type process driven by noncentral t innovations. While the method involves the use of several shortcuts for speed, it performs admirably in terms of accuracy and actually outperforms highly competitive models. Most remarkably, this is the case also for sample sizes as small as 250. View Full-Text
Keywords: GARCH; mixture-normal-GARCH; noncentral t; lookup table GARCH; mixture-normal-GARCH; noncentral t; lookup table

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This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

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Krause, J.; Paolella, M.S. A Fast, Accurate Method for Value-at-Risk and Expected Shortfall. Econometrics 2014, 2, 98-122.

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