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Estimating value-at-risk for Chinese stock market by switching regime ARCH model

Ip, W. and Wong, H. and Pan, J. and Yuan, K. (2006) Estimating value-at-risk for Chinese stock market by switching regime ARCH model. Journal of Industrial and Management Optimization, 2 (2). pp. 145-163. ISSN 1547-5816

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Abstract

This paper proposes a method of estimating Value at Risk (VaR) based on the assumption that the financial returns follow a switching regime ARCH model. We use the simple switching-regime model, the traditional GARCH(1,1) model and the switching-regime ARCH model to do some empirical analysis and to calculate the VaR values under different confidence levels for Shanghai and Shenzhen Stock Index. The calculated VaR values are com- pared. The results of back-testing and the Proportion of Failure test show the VaR values calculated by the switching-regime ARCH model are preferred to other methods.

Item type: Article
ID code: 5460
Keywords: value-at-risk, switching regime, ARCH model, clustering, leptokurtosis, fat-tailed distribution, back-testing, statistics, modelling science, Statistics, Control and Optimization, Business and International Management, Strategy and Management, Applied Mathematics
Subjects: Social Sciences > Statistics
Department: Faculty of Science > Mathematics and Statistics
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Depositing user: Strathprints Administrator
Date Deposited: 06 Mar 2008
Last modified: 04 Sep 2014 17:05
URI: http://strathprints.strath.ac.uk/id/eprint/5460

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