RT Report
T1 Risk Management of Risk under the Basel Accord:Forecasting Value-at-Risk of VIX Futures
A1 Chang, Chia-Lin
A1 Jiménez Martín, Juan Ángel
A1 McAleer, Michael
A1 Pérez Amaral, Teodosio
AB The Basel II Accord requires that banks and other Authorized Deposit-taking Institutions (ADIs) communicate their daily risk forecasts to the appropriate monetary authorities at the beginning of each trading day, using one or more risk models to measure Value-at-Risk (VaR). The risk estimates of these models are used to determine capital requirements andassociated capital costs of ADIs, depending in part on the number of previous violations, whereby realised losses exceed the estimated VaR. McAleer, Jimenez-Martin and Perez-Amaral (2009) proposed a new approach to model selection for predicting VaR, consisting of combining alternative risk models, and comparing conservative and aggressive strategies for choosing between VaR models. This paper addresses the question of risk management of risk, namely VaR of VIX futures prices. We examine how different risk management strategies performed during the 2008-09 global financial crisis (GFC). We find that an aggressive strategy of choosing the Supremum of the single model forecasts is preferred to the other alternatives, and is robust during the GFC. However, this strategy implies relatively highnumbers of violations and accumulated losses, though these are admissible under the Basel II Accord.
PB Instituto Complutense de Análisis Económico. Universidad Complutense de Madrid
SN 2341-2356
YR 2011
FD 2011
LK https://hdl.handle.net/20.500.14352/48967
UL https://hdl.handle.net/20.500.14352/48967
LA eng
NO National Science Council, Taiwan
NO Ministerio de Ciencia y Tecnología
NO Comunidad de Madrid
NO Australian Research Council
NO Japan Society for the Promotion of Science
DS Docta Complutense
RD 7 abr 2025