Index-Exciting CAViaR: A New Empirical Time-Varying Risk Model

Instead of assuming the distribution of return series, Engle and Manganelli (2004) propose a new Value-at-Risk (VaR) modeling approach, Conditional Autoregressive Value-at-Risk (CAViaR), to directly compute the quantile of an individual asset’s returns which performs better in many cases than those that invert a return distribution.

Author(s):

Frank J. Fabozzi

Yale School of Management

Sergio Focardi

EDHEC Business School

Masao Fukushima

Kyoto University

Dashan Huang

Washington University in St. Louis

Zudi Lu

School of Mathematical Sciences,The University of Adelaide

Baimin Yu

School of International Tradeand Economics, University of International Business and Economics

In this paper we explore more flexible CAViaR models that allow VaR prediction to depend upon a richer information set involving returns on an index. Specifically, we formulate a time-varying CAViaR model whose parameters vary according to the evolution of the index. The empirical evidence reported in this paper suggests that our timevarying CAViaR models can do a better job for VaR prediction when there are spillover effects from one market or market segment to other markets or market segments.
Pdf
Index-Exciting CAViaR: A New Empirical Time-Varying Risk Model...
(-1.00 B)
Type: Working paper
Date: le 10/09/2008
Extra information : For more information, please contact Joanne Finlay, EDHEC Research and Development Department [ joanne.finlay@edhec.edu ] The contents of this paper do not necessarily reflect the opinions of EDHEC Business School.
Research Cluster : Finance

See Also

Entrepreneurship prize - the Trophees d'Asie
News
- 07-12-2018
On 6th December, EDHEC Business School had the pleasure of sponsoring the...
News
- 07-12-2018
EDHEC Business School and the Centre for Finance, Technology and Entrepreneurship (CFTE) will team up to launch an innovative FinTech course from Q1 2019. The hybrid on- and offline...
EDHEC PhD candidate Eric Tham’s research presented at the 31st Australasian Finance and Banking Conference
News
- 06-12-2018
“Trusting the Social Media”  PhD candidate in Finance at EDHEC Business School (...
{EDHEC EXPERIENCE} Student Consulting for Development (SCD) : a gap year with meaning
News
- 04-12-2018
Since 2001, the EDHEC student association Student Consulting for Development (SCD) has...