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A Copula-Garch Model For A Proxy Portfolio For Bet-Fi Index

Author

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  • ACATRINEI, Marius

    (Financial Supervisory Authority, Romania)

Abstract

The paper fits a copula-Garch model for a proxy portfolio of BET-FI index and computes its Expected Shorfall. We used daily closing prices spanning for a two year period. The results indicate that the portfolio’s Expected Shortfall computed with a copula-Garch is higher than otherwise reported by a naive Value at Risk. The VaR computed with variance-covariance method assumes a multivariate Gaussian distribution and produces results that constantly underestimates the risk due to incorrect distributional assumptions.

Suggested Citation

  • ACATRINEI, Marius, 2015. "A Copula-Garch Model For A Proxy Portfolio For Bet-Fi Index," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 19(2), pages 8-16.
    • Handle: RePEc:vls:finstu:v:19:y:2015:i:2:p:8-16
    as

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    References listed on IDEAS

    as
    1. W. Breymann & A. Dias & P. Embrechts, 2003. "Dependence structures for multivariate high-frequency data in finance," Quantitative Finance, Taylor & Francis Journals, vol. 3(1), pages 1-14.
    2. Eric Jondeau & Michael Rockinger, 2002. "Conditional Dependency of Financial Series: The Copula-GARCH Model," FAME Research Paper Series rp69, International Center for Financial Asset Management and Engineering.
    3. Andrew J. Patton, 2006. "Modelling Asymmetric Exchange Rate Dependence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 527-556, May.
    4. Jondeau, Eric & Rockinger, Michael, 2006. "The Copula-GARCH model of conditional dependencies: An international stock market application," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 827-853, August.
    5. Chih‐Chiang Hsu & Chih‐Ping Tseng & Yaw‐Huei Wang, 2008. "Dynamic hedging with futures: A copula‐based GARCH model," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 28(11), pages 1095-1116, November.
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    More about this item

    Keywords

    Garch model; Copula function; Stock Market Indices; Expected Shortfall;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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