Empirical analysis of GARCH models in value at risk estimation
This paper studies seven GARCH models, including RiskMetrics and two long memory
GARCH models, in Value at Risk (VaR) estimation. Both long and short positions of
investment were considered. The seven models were applied to 12 market indices and four
foreign exchange rates to assess each model in estimating VaR at various confidence
levels. The results indicate that both stationary and fractionally integrated GARCH models
outperform RiskMetrics in estimating 1% VaR. Although most return series show fat-tailed …
GARCH models, in Value at Risk (VaR) estimation. Both long and short positions of
investment were considered. The seven models were applied to 12 market indices and four
foreign exchange rates to assess each model in estimating VaR at various confidence
levels. The results indicate that both stationary and fractionally integrated GARCH models
outperform RiskMetrics in estimating 1% VaR. Although most return series show fat-tailed …
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