Journal of Risk
ISSN:
1465-1211 (print)
1755-2842 (online)
Editor-in-chief: Farid AitSahlia
Value-at-risk using the factor-ARCH model
Charlotte Christiansen
Abstract
ABSTRACT
In this paper a modification of the factor-ARCH model proposed by Engle, Ng, and Rothschild (1990) is used to calculate the value-at-risk (VaR) of portfolios of Danish zero-coupon bonds. The factors are constructed as orthogonal portfolios of the bonds (denoted factor representing portfolios) using principal components analysis. The returns of the factor representing portfolios are assumed to be described by the univariate GARCH(1,1) model. The VaR is estimated in a two-factor setting for a number of zero-coupon bond portfolios, and these VaR quantities are compared to actual losses. The calculated VaR amounts are also compared to the RiskMetrics estimates.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
