A conditional-SGT-VaR approach with alternative GARCH models

This paper proposes a conditional technique for the estimation of VaR and expected shortfall measures based on the skewed generalized t (SGT) distribution. The estimation of the conditional mean and conditional variance of returns is based on ten popular variations of the GARCH model. The results indicate that the TS-GARCH and EGARCH models have the best overall performance. The remaining GARCH specifications, except in a few cases, produce acceptable results. An unconditional SGT-VaR performs well on an in-sample evaluation and fails the tests on an out-of-sample evaluation. The latter indicates the need to incorporate time-varying mean and volatility estimates in the computation of VaR and expected shortfall measures. Keywords GARCH models . Skewed generalized t distribution . Conditional value at risk . Expected shortfall

• Type: Journal
• Year: 2007
• Where: ANOR
• Authors: Turan G. Bali, Panayiotis Theodossiou
• Keywords: ANOR 2007, Conditional Technique, Expected Shortfall, Garch Models