Journal of Risk

Risk.net

Time-scaling of value-at-risk in GARCH(1,1) and AR(1)–GARCH(1,1) processes

Raymond Brummelhuis and Roger Kaufmann

ABSTRACT

This paper investigates the estimation of a 10-day value-at-risk (VaR) based on a data set of 250 daily values. The commonly used square-rootof-time rule, which scales the one-day 99% VaR with a factor √10, is compared with alternative 10-day estimators in the case of random walks, GARCH(1,1) and AR(1)-GARCH(1,1) processes. Additionally, some theoretical results on N-day VaR in such models are presented. The overall conclusion is that, although not perfect, the √10-rule performs reasonably well.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here