Phd thesis on value at risk

This model can be easily generalized from the bivariate case to the multivariate case. Finally, an interesting topic for further research is suggested. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios.

What is var

A novel time-varying skewed t copula TVAC model is proposed to accommodate non-Gaussian features in univariate time series as well as the dynamic and asymmetric dependence in multivariate time series. The multivariate asymmetry is captured by the skewed t copula derived from the mutlivariate skewed t distribution in Bauwens and Laurent and the time-varying dependence is captured by the GAS dynamics proposed by Creal et al. The thesis compares performance of the dynamic implied BL portfolio and the dynamic SR-BL portfolio in the single period and multiple periods with in-sample analysis and out-of-sample analysis. Second, we offer a methodological contribution. The dynamic BL portfolios based on the DCC volatility model perform best in contrast to other two volatility models. The first part of this chapter briefly introduces the definition and properties of copulas as well as several related concepts. The third part provides an exhaustive review of the extensive literature of copula-based models in finance and economics.

Read more The thesis first extends the original Black-Litterman model to dynamic asset allocation area by using the expected conditional equilibrium return and conditional covariances based on three volatility models the DCC model, the EWMA model and the RW model into the reverse optimisation of the utility function the implied BL portfolio and the maximised Sharpe ratio optimisation model the SR-BL portfolio.

Second, we offer a methodological contribution. PhD in Finance Abstract The thesis first extends the original Black-Litterman model to dynamic asset allocation area by using the expected conditional equilibrium return and conditional covariances based on three volatility models the DCC model, the EWMA model and the RW model into the reverse optimisation of the utility function the implied BL portfolio Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score GAS model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios.

value at risk matlab

The thesis compares performance of the dynamic implied BL portfolio and the dynamic SR-BL portfolio in the single period and multiple periods with in-sample analysis and out-of-sample analysis.

We document asymmetric and time-varying features of dependence between the credit risk of UK top tier banks using a new CDS dataset.

Minimize value at risk

Third, we show that findings of dynamic and asymmetric dependence between equity and currency have important implications for risk management and asset allocation in international financial markets. Our empirical results show the statistical significance of the TVAC model in risk management and its economic values in real-time investment. From backtesting, we find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management. Item Type:. Furthermore, we perform an extensive regression analysis and find solid evidence that time-varying tail dependence between CDS spreads of UK banks contains useful information to explain and predict their joint and conditional default probabilities. The first chapter of this thesis provides a comprehensive review of recent developments of copula models and some important applications in the large and growing finance and economics literature. We document asymmetric and time-varying features of dependence between the credit risk of UK top tier banks using a new CDS dataset. The second part reviews estimation and inference methods, goodness-of-fit tests and model selection tests for copula models considered in the literature. This model can be easily generalized from the bivariate case to the multivariate case. Second, we offer a methodological contribution. The dynamic BL portfolios based on the DCC volatility model perform best in contrast to other two volatility models. Both in-sample performance and out-of-sample performance could be improved by imposing constraints, and they suggest adding moderate CVaR constraints to maximal Sharpe ratio optimisation model with t-distribution at certain confidence level could obtain the best dynamic DCC-BL portfolio performance in the single period and multiple periods. We show that all the empirical features of CDS spreads, such as heavy-tailedness, skewness, time-varying volatility, multivariate asymmetries and dynamic dependence, can be captured well by our model.

First, we find striking evidence for the existence of time-varying and asymmetric dependence between equity and currency. Our empirical results show the statistical significance of the TVAC model in risk management and its economic values in real-time investment.

value at risk pdf
Rated 5/10 based on 33 review
Download
Empirical essays in quantitative risk management