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Market Risk Recognition by Different Models in Listed Banks of Tehran Stock Exchange and OTC

Author

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  • Salehi , Mahdi

    (Ferdowsi University of Mashhad)

  • Zamani , Mohammad

    (Department of Accounting, College of Management Economics and Accounting, Tabriz Branch, Islamic Azad University)

Abstract

One of the most important methods employed to measure the market risk is value at risk calculation method. In this study, the value at risk of banks listed on the Tehran Stock Exchange and Over-the-counter (OTC) are calculated using parametric model, Monte Carlo simulation, historical simulation and Two-Sided Power (TSP) Distribution. The sample includes all listed banks in Iran. The results showed that the value at risk estimated by TSP and historical models is more accurate than the VaR estimated by Monte Carlo and GARCH models. TSP model and then historical model are more accurate than the other ones. Moreover, GARCH is the least accurate model. So far, no research has been conducted to investigate all four models of value at risk assessment.

Suggested Citation

  • Salehi , Mahdi & Zamani , Mohammad, 2014. "Market Risk Recognition by Different Models in Listed Banks of Tehran Stock Exchange and OTC," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 9(1), pages 147-176, October.
    • Handle: RePEc:mbr:jmonec:v:9:y:2014:i:1:p:147-176
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    References listed on IDEAS

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    More about this item

    Keywords

    Market risk; Value at risk; GARCH model; Monte Carlo method; Historical simulation; TSP method;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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