Munich Personal RePEc Archive

The Use of GARCH Models in VaR Estimation

Angelidis, Timotheos and Benos, Alexandros and Degiannakis, Stavros (2004): The Use of GARCH Models in VaR Estimation. Published in: Statistical Methodology , Vol. 2, No. 1 (2004): pp. 105-128.

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We evaluate the performance of an extensive family of ARCH models in modelling daily Valueat-Risk (VaR) of perfectly diversified portfolios in five stock indices, using a number of distributional assumptions and sample sizes. We find, first, that leptokurtic distributions are able to produce better one-step-ahead VaR forecasts; second, the choice of sample size is important for the accuracy of the forecast, whereas the specification of the conditional mean is indifferent. Finally, the ARCH structure producing the most accurate forecasts is different for every portfolio and specific to each equity index.

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