Revised Historical Simulation Methods for Estimating VaR
Date Issued
2007
Date
2007
Author(s)
Chiu, Chao-Chuan
Abstract
Abstract his study made comparisons among the two revised historical simulation methods, Boudoukh, Richardson and Whitelaw’s (1998) hybrid method,Hull and White’s (1998) method, traditional historical method ,and Monte Carlo simulation for estimating Value-at-Risk.Using 10 years of 4 foreign exchange rates , the empirical results show that Hull and White’s (1998) method is a relative improvement for three confidence levels,based on the analysis of conservativeness, accuracy and efficiency. The results of the research are as following:. Among four models in my research, Monte Carlo model gets the best performance in all dimensions.. Changing confidence interval affects models’ performance, from which we should take it into consideration.. From the conservativeness point of view, Monte Carlo method performs well than Hull-White model in the average.. Hybrid method performs the worst in average, but it may have the best performance from the conservativeness perspective. . When performing risk measures such as VaR , it is necessary for portfolio managers to consider the features of underlying assets ,the restrictions of various VaR models ,and the significance level.
Subjects
value at risk
Type
thesis
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