RT Report
T1 International Evidence on GFC-robust Forecasts forRisk Management under the Basel Accord
A1 McAleer, Michael
A1 Jiménez Martín, Juan Ángel
A1 Pérez Amaral, Teodosio
AB A risk management strategy that is designed to be robust to the Global Financial Crisis (GFC), in the sense of selecting a Value-at-Risk (VaR) forecast that combines the forecasts of different VaR models, was proposed in McAleer et al. (2010c). The robust forecast is based on the median of the point VaR forecasts of a set of conditional volatility models. Such a risk management strategy is robust to the GFC in the sense that, while maintaining the same risk management strategy before, during and after a financial crisis, it will lead to comparatively low daily capital charges and violation penalties for the entire period. This paper presents evidence to support the claim that the median point forecast of VaR is generally GFC-robust. We investigate the performance of a variety of single and combined VaR forecasts in terms of daily capital requirements and violation penalties under the Basel II Accord, as well as other criteria. In the empirical analysis, we choose several major indexes, namely French CAC, German DAX, US Dow Jones, UK FTSE100, Hong Kong Hang Seng, Spanish Ibex35, Japanese Nikkei, Swiss SMI and US S&P500. The GARCH, EGARCH, GJR and Riskmetrics models, as well as several other strategies, are used in the comparison. Backtesting is performed on each of these indexes using the Basel II Accord regulations for 2008-10 to examine the performance of the Median strategy in terms of the number of violations and daily capital charges, among other criteria. The Median is shown to be a profitable and safe strategy for risk management, both in calm and turbulent periods, as it provides a reasonable number of violations and daily capital charges. The Median also performs well when both total losses and the asymmetric linear tick loss function are considered.
PB Instituto Complutense de Análisis Económico. Universidad Complutense de Madrid
YR 2011
FD 2011
LK https://hdl.handle.net/20.500.14352/48961
UL https://hdl.handle.net/20.500.14352/48961
LA eng
NO Australian Research Council
NO National Science Council, Taiwan
NO Japan Society for the Promotion of Science
NO España. Ministerio de Ciencia y Tecnología
NO Comunidad de Madrid
DS Docta Complutense
RD 24 oct 2025