MARKET RISK MEASURES: ACCURACY TESTING OF VAR MODELS IN THE MALAYSIAN MARKET
Keywords:
Value-at-Risk, volatility modelling, accuracy testAbstract
The objective of this paper is to determine the most accurate Value-at-Risk (VaR) model as market risk measure for the non-financial sectors in Malaysia. Using Monte Carlo Simulation (MCS) plus selected volatility models for seven sectors, the expected maximum losses are determined at 95% level of confidence. To complement the risk measure, several accuracy tests namely Kupiec, Christoffersen and Lopez tests were applied in later stage. Final results proved that by allowing abnormalities (such as fat tails or asymmetries), the estimation for market risk in the Malaysian market will certainly improve the reliability of the risk forecast.Downloads
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Published
2012-12-01
How to Cite
Ahmad Baharul Ulum, Z. K., Ahmad, I., Salamudin, N., & Wan Daud, W. M. N. (2012). MARKET RISK MEASURES: ACCURACY TESTING OF VAR MODELS IN THE MALAYSIAN MARKET. International Business Education Journal, 5(1), 72–91. Retrieved from https://ojs.upsi.edu.my/index.php/IBEJ/article/view/1395
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