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Value-at-Risk Analysis for the Tunisian Currency Market: A Comparative Study

Author

Listed:
  • Aymen BEN REJEB

    (Higher Institute of Management of Sousse, University of Sousse, Tunisia)

  • Ousama BEN SALHA

    (Higher Institute of Management of Sousse, University of Sousse, Tunisia)

  • Jaleleddine BEN REJEB

    (Higher Institute of Management of Sousse, University of Sousse, Tunisia)

Abstract

The main purpose of this paper is to compare empirically four Value-at-Risk simulation methods, namely, the Variance-Covariance, the Historical Simulation, the Bootstrapping and the Monte Carlo. We tried to estimate the VaR associated to three currencies and four currency portfolios in the Tunisian exchange market. Data covers the period between 01-01-1999 and 31-12-2007. Independently of the used technique, the Japanese Yen seems to be the most risky currency. Moreover, the portfolio diversification reduces the exchange rate risk. Lastly, the number of violations, when they exist, does not generally differ between the simulation methods. Recent evaluation tests were applied to select the most appropriate technique predicting precisely the exchange rate risk. Results based on these tests suggest that the traditional Variance-Covariance is the most appropriate method.

Suggested Citation

  • Aymen BEN REJEB & Ousama BEN SALHA & Jaleleddine BEN REJEB, 2012. "Value-at-Risk Analysis for the Tunisian Currency Market: A Comparative Study," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 110-125.
    • Handle: RePEc:eco:journ1:2012-02-2
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    References listed on IDEAS

    as
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    Cited by:

    1. Pablo Farías, 2014. "Divulgación del valor en riesgo (VaR) previo a la crisis en el sector bancario espanol," Revista Ad-Minister, Universidad EAFIT, July.
    2. Charles Raoul Tchuinkam Djemo & John Weirstrass Muteba Mwamba & Mathias Mandla Manguzvane, 2021. "Exchange Rate Risk and International Equity Portfolio Diversification: A South African Investor’s Perspective," The African Finance Journal, Africagrowth Institute, vol. 23(2), pages 36-49.
    3. Ourir, Awatef & Snoussi, Wafa, 2012. "Markets liquidity risk under extremal dependence: Analysis with VaRs methods," Economic Modelling, Elsevier, vol. 29(5), pages 1830-1836.

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    More about this item

    Keywords

    Value-at-Risk; Tunisian currency market; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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