A comparison of several time-series models for assessing the value at risk of shares

Abstract

The objective of this investigation was to assess the suitability of some standard time-series models to perform a specific task in the context of recent change in banking regulations in Germany. The task is to estimate the value at risk (VaR) associated with financial assets on a daily basis. The procedure employed by the supervisory authorities to monitor whether a model used for this purpose adequately performs this task is outlined. Nine time-series models were investigated using share prices from the Frankfurt Stock exchange. The models were compared in terms of criteria that are derived from the new regulations. The results are reported. Copyright (C) 2001 John Wiley & Sons, Ltd.