Journal of Risk Model Validation

Testing value-at-risk models in emerging markets during crises: a case study on South Eastern European countries

Nikola Curcic, Dragana Milojkovic, Vuk Miletic and Nikola Radivojević

  • The most widely used VaR models are not well suited for emerging markets
  • The regulatory authorities should discourage or prohibit the use of traditional VaR models
  • It is necessary to use the most appropriate VaR model at the emerging markets


This case study examines the applicability of a wide range of value-at-risk (VaR) models in emerging markets, using the South Eastern European countries as examples. The aim of the paper is to get answers to two questions. The first question is whether VaR models that are created and suited to developed markets can be used reliably in emerging markets, such as the South Eastern European countries. The second question is whether modifications can improve their applicability to these markets. The results show that the most popular and widely used VaR models are not well suited to measuring market risk in the South Eastern European countries, and it is necessary to use the most appropriate VaR model for measuring market risk in these markets.

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