Preliminary communication

Global financial crisis and VaR performance in emerging markets: A case of EU candidate states - Turkey and Croatia

Saša Žiković ; Faculty of Economics, University of Rijeka, Rijeka, Croatia
Bora Aktan ; Faculty of Economics and Administrative Sciences, Yasar University, Bornova, Izmir, Turkey

Abstract

We investigate the relative performance of a wide array of Value at Risk (VaR) models with the daily returns of Turkish (XU100) and Croatian (CROBEX) stock index prior to and during the ongoing financial crisis. In addition to widely used VaR models, we also study the behaviour of conditional and unconditional extreme value theory (EVT) and hybrid historical simulation (HHS) models to generate 95, 99 and 99.5% confidence level estimates. Results indicate that during the crisis period all tested VaR model except EVT and HHS models seriously underpredict the true level of risk, with EVT models doing so at a higher cost of capital compared to HHS model.

Keywords

Financial crisis; emerging markets; Value at Risk; extreme value theory; hybrid historical simulation

Hrčak ID:

38423

URI

https://hrcak.srce.hr/38423

Publication date:

29.6.2009.

Article data in other languages: croatian

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