FORECASTING AND EVALUATION OF ONE DAY AHEAD VALUE AT RISK FOR TEHRAN STOCK EXCHANGE USING MARKOV CHAIN MONTE CARLO SIMULATION

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ADABI BAGHER; MEHRARA MOHSEN; MOHAMMADI SHAPOUR

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Paper Information

Journal: FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT) Year:2016 | Volume:7 | Issue:26 Page(s): 101-122

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Title

FORECASTING AND EVALUATION OF ONE DAY AHEAD VALUE AT RISK FOR TEHRAN STOCK EXCHANGE USING MARKOV CHAIN MONTE CARLO SIMULATION

Author(s)

ADABI BAGHER | MEHRARA MOHSEN | MOHAMMADI SHAPOUR | Issue Writer Certificate

Keywords

VALUE AT RISKQ1

MARKOV CHAIN MONTE CARLOQ1

BACKTESTINGQ1

METROPOLIS-HASTINGS ALGORITHMQ1

Abstract

The recent global financial crisis causes that financial markets participants provide an acceptable framework for their risk coverage. One of the most important risk measures for this purpose is VALUE AT RISK (VaR) which is intended in finance literature in the past two decades. In general there are three approaches including parametric, nonparametric and semi-parametric techniques is used for estimating of VaR. This paper presents a new method that is named MARKOV CHAIN MONTE CARLO (MCMC) simulation which is based on reproduction and generation of data such as Monte Carlo simulation methods. But, in this new method, data production is done in basis of METROPOLIS-HASTINGS ALGORITHM. Considering quantile of generated returns distribution, VaR is calculated. Next, one day ahead VALUE AT RISK of Tehran Stock Exchange indices for 200 future days are forecasted via this new method and also the accuracy of estimated VaR is evaluated by conditional and unconditional coverage BACKTESTING statistics. Empirical results of this paper indicate that MCMC method for estimation and forecasting VaR of TSE indices has a reliable performance.

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APA: Copy

ADABI, BAGHER, MEHRARA, MOHSEN, & MOHAMMADI, SHAPOUR. (2016). FORECASTING AND EVALUATION OF ONE DAY AHEAD VALUE AT RISK FOR TEHRAN STOCK EXCHANGE USING MARKOV CHAIN MONTE CARLO SIMULATION. FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT), 7(26), 101-122. SID. https://sid.ir/paper/197735/en

Vancouver: Copy

ADABI BAGHER, MEHRARA MOHSEN, MOHAMMADI SHAPOUR. FORECASTING AND EVALUATION OF ONE DAY AHEAD VALUE AT RISK FOR TEHRAN STOCK EXCHANGE USING MARKOV CHAIN MONTE CARLO SIMULATION. FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT)[Internet]. 2016;7(26):101-122. Available from: https://sid.ir/paper/197735/en

IEEE: Copy

BAGHER ADABI, MOHSEN MEHRARA, and SHAPOUR MOHAMMADI, “FORECASTING AND EVALUATION OF ONE DAY AHEAD VALUE AT RISK FOR TEHRAN STOCK EXCHANGE USING MARKOV CHAIN MONTE CARLO SIMULATION,” FINANCIAL ENGINEERING AND SECURITIES MANAGEMENT (PORTFOLIO MANAGEMENT), vol. 7, no. 26, pp. 101–122, 2016, [Online]. Available: https://sid.ir/paper/197735/en

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