Conference
Monitoring the Value at Risk Over Time in Finance
Proceedings of the XIVth International Workshop on Intelligent Statistical Quality Control
— 2023
Key information
Authors:
Published in
2023
Abstract
The value-at-risk (VaR) has become the standard market risk measure since the 1980s and regulators have traditionally used VaR to cal- culate the capital required for banks to keep. On the one hand, autoregressive moving average (ARMA) models with generalized autoregressive conditionally heteroscedastic (GARCH) innovations, also termed ARMA-GARCH, have proved to be adequate to describe financial time series that tend not to operate under the assumption of constant conditional variance. On the other hand, control charts have been thoroughly used to detect relevant structural deviations in the process underlying a financial time series. In this paper, we propose two charts for monitoring the VaR of financial assets assuming that the returns follow a general ARMA-GARCH process. The suggested approach helps investors detect structural breaks in the riskiness of their positions; it also assists them in adjusting their portfolios to comply with regulatory requirements. We believe these charts have the potential to play a crucial role in the swift detection of structural changes in ARMA-GARCH processes and additionally lead to economically profitable investment strategies.
Publication details
Authors in the community:
Manuel Cabral Morais
ist13114
Title of the publication container
Proceedings of the XIVth International Workshop on Intelligent Statistical Quality Control
Location of the conference
Washington, DC
Conference date start
August 15, 2023
Conference date end
August 17, 2023
First page or article number
105
Last page
118
Fields of Science and Technology (FOS)
mathematics - Mathematics
Publication language (ISO code)
eng - English
Rights type:
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