ISSN 1842-4562
Member of DOAJ

Value-at-Risk Estimation on Bucharest Stock Exchange


Olivia Andreea BACIU


Keywords

Value-at-Risk, Generalized Hyperbolic Distributions, Heavy Tails, Stock Market Data

Abstract

As an important tool in risk management, Value-at-Risk is estimated on the Romanian stock market based on single assets and a weighted portfolio of them. Because this is a measure of the extreme tails, several approaches are used to compute Value-at-Risk by taking in consideration the distribution of the data, namely the generalized hyperbolic distribution, Normal-Inverse Gaussian and asymmetric t-Student in comparison with the normal distribution. The considered period is divided into an analyze period and a test one, where based on the rolling windows approach are estimated the VaR values and then tested with the help of Kupiec’s and Christoffersen’s backtests. The choice of the time period affects the estimation due to the events that took place on the market and the approach based on the normal distribution predicted best the VaR values by underestimating the risk compared to the other distributions. This approach fits better the considered period because the analyzed period covers moments of severe economical crisis while the test period goes over a period of recovery.



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