In this paper we show that by assuming a constant variance/covariance matrix over the holding period, the VaR limits can often be exceeded within the relevant horizon period. To minimize this risk, we formulate the problem ...

We propose filtering historical simulation by GARCH processes to model the future distribution of assets and swap values. Options’ price changes are computed by full reevaluation on the changing prices of underlying assets. ...

This paper we backtest the FHS VaR model on three types of portfolios invested over a period of two years. The first set of backtests consists of LIFFE financial futures and options contracts traded on LIFFE. In the second ...

In this paper we propose to model short-term interest rates by taking into consideration both the asymmetric properties of returns, using Pearson’s type IV distribution, and the time-varying volatility, using GARCH models. ...

The Value-at-Risk (VaR) criterion as a measure of portfolio's risk on long run horizons is considered. The method which makes possible to generate VaR estimates on longer horizons is suggested. The VaR estimation is based ...

Filtered historical simulation provides the general framework to our backtests of portfolios of derivative securities held by a large sample of financial institutions. We allow for stochastic volatility and exchange rates. ...

Filtered historical simulation provides the general framework to our backtests of portfolios of derivative securities held by a large sample of financial institutions. We allow for stochastic volatility and exchange rates. ...

This paper investigates the volatility spillovers of four major equity markets using a new approach namely, the Filtered Historical Simulation approach (FHS). The FHS captures very effectively the changes ...