Indian Journal of Finance
By: Associated Management Consultants (P) Ltd.Single Issue
Single Issue
- IJF-Sep09-Article6-Stochastic Volatility Model For Indian Security Indices : VaR Estimation and Backtesting
- Price : 80.00
- Published on September 2, 2009
- Associated Management Consultants (P) Ltd.
- Issues 356
- Language - English
- Published daily
About this issue
Value-at-Risk (VaR) estimation through volatility analysis is a regulatory requirement. Many asset management companies and bourses tend to use EWMA and GARCH based techniques towards this. This paper compares the predictive power of Stochastic Volatility Model (SVM) and Kalman Filter (KF) based approach vis-Ã -vis EWMA and GARCH based approaches with data from Indian security indices. A Quasi-Maximum Likelihood (QML) based on KF is used for estimation of parameters for the underlying state space SVM. It is found that, with a representative data set, VaR backtesting result from the SVM significantly outperforms the traditionally recommended EWMA based techniques.
About Indian Journal of Finance
Indian Journal of Finance, a source of sophisticated analysis of developments in the rapidly expanding world of finance, is a monthly journal with topics ranging from corporate to personal finance, insurance to financial economics and derivatives.