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Hybrid Concepts of Long-Term Estimates for Value at Risk

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  • Mentel Grzegorz

    (Department of Quantitative Methods in Economics, Faculty of Management and Marketing, Rzeszow University of Technology, Powstańców Warszawy 8, 35-959 Rzeszów)

Abstract

There is a growing demand for models which enable to measure and assess the risk in long-term horizons (sometimes more than 2 years). The practical demand for such models is required by the institutions which manage the investments and retirement funds. In the paper the theoretical aspects of risk assessment methodology with the use of Value at Risk (VaR) were presented. In this method in order to estimate the long-term VaR limits the hybrid model which is the optimum mixture of random walk and mean reversion was used. The application of the presented methodology was exemplified by the estimation of long-term predictions for VaR limits for stock prices.

Suggested Citation

  • Mentel Grzegorz, 2008. "Hybrid Concepts of Long-Term Estimates for Value at Risk," Folia Oeconomica Stetinensia, Sciendo, vol. 7(1), pages 1-12, January.
    • Handle: RePEc:vrs:foeste:v:7:y:2008:i:1:p:1-12:n:4
    DOI: 10.2478/v10031-008-0004-0
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    References listed on IDEAS

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    1. Glen, Jack D., 1992. "Real exchange rates in the short, medium, and long run," Journal of International Economics, Elsevier, vol. 33(1-2), pages 147-166, August.
    2. Metcalf, Gilbert E. & Hassett, Kevin A., 1995. "Investment under alternative return assumptions Comparing random walks and mean reversion," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1471-1488, November.
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