Journal of the Korean Data and Information Science Society

The Korean Data and Information Science Society (한국데이터정보과학회)
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The GARCH-GPD in market risks modeling: An empirical exposition on KOSPI

  • Received : 2016.10.31
  • Accepted : 2016.11.24
  • Published : 2016.11.30
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Abstract

Risk analysis is a systematic study of uncertainties and risks we encounter in business, engineering, public policy, and many other areas. Value at Risk (VaR) is one of the most widely used risk measurements in risk management. In this paper, the Korean Composite Stock Price Index data has been utilized to model the VaR employing the classical ARMA (1,1)-GARCH (1,1) models with normal, t, generalized hyperbolic, and generalized pareto distributed errors. The aim of this paper is to compare the performance of each model in estimating the VaR. The performance of models were compared in terms of the number of VaR violations and Kupiec exceedance test. The GARCH-GPD likelihood ratio unconditional test statistic has been found to have the smallest value among the models.

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References

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