Journal of Risk
ISSN:
1465-1211 (print)
1755-2842 (online)
Editor-in-chief: Farid AitSahlia

Misspecified likelihood function and value-at-risk Italian banks' interest rate risk exposure
Ebenezer Asem
Abstract
ABSTRACT
Estimating value-at-risk (VAR) requires a precise forecast of the future risk structure. Many VAR estimation techniques impose ad hoc theoretical distributions. In GARCH frameworks, a wrong distributional assumption will generate inefficient parameter estimates and, conditionally, impose a wrong structure on the future dispersion of risk. To address problems associated with the latter, Barone-Adesi, Giannopoulos and Vosper (1999) propose a bootstrap procedure for forecasting the future risk structure. This paper studies the effects of inefficient parameter estimates from a wrong likelihood assumption on the VAR estimates. The results suggest that inefficient parameter estimates do not have adverse effects on the efficiency of the VAR forecasts.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net