Interval Estimation of Value-at-Risk Based on Nonparametric Models

Abstract : Value-at-Risk (VaR) has become the most important benchmark for measuring risk in portfolios of different types of financial instruments. However, as reported by many authors, estimating VaR is subject to a high level of uncertainty. One of the sources of uncertainty stems from the dependence of the VaR estimation on the choice of the computation method. As we show in our experiment, the lower the number of samples, the higher this dependence. In this paper, we propose a new nonparametric approach called maxitive kernel estimation of the VaR. This estimation is based on a coherent extension of the kernel-based estimation of the cumulative distribution function to convex sets of kernel. We thus obtain a convex set of VaR estimates gathering all the conventional estimates based on a kernel belonging to the above considered convex set. We illustrate this method in an empirical application to daily stock returns. We compare the approach we propose to other parametric and nonparametric approaches. In our experiment, we show that the interval-valued estimate of the VaR we obtain is likely to lead to more careful decision, i.e., decisions that cannot be biased by an arbitrary choice of the computation method. In fact, the imprecision of the obtained interval-valued estimate is likely to be representative of the uncertainty in VaR estimate.
Liste complète des métadonnées

https://hal-lirmm.ccsd.cnrs.fr/lirmm-01951982
Contributeur : Olivier Strauss <>
Soumis le : mardi 11 décembre 2018 - 17:52:00
Dernière modification le : mercredi 19 décembre 2018 - 15:02:06

Licence


Distributed under a Creative Commons Paternité 4.0 International License

Identifiants

Citation

Hussein Khraibani, Bilal Nehme, Olivier Strauss. Interval Estimation of Value-at-Risk Based on Nonparametric Models. Econometrics, MDPI, 2018, 6 (4), pp.47-77. 〈10.3390/econometrics6040047〉. 〈lirmm-01951982〉

Partager

Métriques

Consultations de la notice

46

Téléchargements de fichiers

10