Khalfaoui, R and Boutahar, M (2012): Portfolio risk evaluation: An approach based on dynamic conditional correlations models and wavelet multiresolution analysis.

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Abstract
We analyzed the volatility dynamics of three developed markets (U.K., U.S. and Japan), during the period 20032011, by comparing the performance of several multivariate volatility models, namely Constant Conditional Correlation (CCC), Dynamic Conditional Correlation (DCC) and consistent DCC (cDCC) models. To evaluate the performance of models we used four statistical loss functions on the daily ValueatRisk (VaR) estimates of a diversified portfolio in three stock indices: FTSE 100, S&P 500 and Nikkei 225. We based on oneday ahead conditional variance forecasts. To assess the performance of the abovementioned models and to measure risks over different timescales, we proposed a waveletbased approach which decomposes a given time series on different time horizons. Wavelet multiresolution analysis and multivariate conditional volatility models are combined for volatility forecasting to measure the comovement between stock market returns and to estimate daily VaR in the timefrequency space. Empirical results shows that the asymmetric cDCC model of Aielli (2008) is the most preferable according to statistical loss functions under raw data. The results also suggest that waveletbased models increase predictive performance of financial forecasting in low scales according to number of violations and failure probabilities for VaR models.
Item Type:  MPRA Paper 

Original Title:  Portfolio risk evaluation: An approach based on dynamic conditional correlations models and wavelet multiresolution analysis 
English Title:  Portfolio risk evaluation: An approach based on dynamic conditional correlations models and wavelet multiresolution analysis 
Language:  English 
Keywords:  Dynamic conditional correlations, ValueatRisk, wavelet decomposition, Stock prices 
Subjects:  D  Microeconomics > D5  General Equilibrium and Disequilibrium > D53  Financial Markets C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C53  Forecasting and Prediction Methods ; Simulation Methods G  Financial Economics > G1  General Financial Markets > G11  Portfolio Choice ; Investment Decisions C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C52  Model Evaluation, Validation, and Selection 
Item ID:  41624 
Depositing User:  KR KHALFAOUI 
Date Deposited:  01. Oct 2012 13:34 
Last Modified:  23. Aug 2015 07:12 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/41624 