RISK EVALUATION OF BANKING INDEX WITH VOLATILITY ESTIMATION THROUGH STOCHASTIC VOLATILITY MODEL: A SEMIPARAMETRIC BAYESIAN APPROACH

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SAJJAD RASOUL; ABTAHI ZAHRA

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Journal: FINANCIAL RESEARCH Year:2017 | Volume:19 | Issue:1 Page(s): 81-96

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Title

RISK EVALUATION OF BANKING INDEX WITH VOLATILITY ESTIMATION THROUGH STOCHASTIC VOLATILITY MODEL: A SEMIPARAMETRIC BAYESIAN APPROACH

Author(s)

SAJJAD RASOUL | ABTAHI ZAHRA | Issue Writer Certificate

Keywords

ASSET RETURNQ2

DIRICHLET PROCESSQ2

MCMC ALGORITHMQ1

STOCHASTIC VOLATILITY MODELQ2

VARQ2

Abstract

Estimation of the return distribution has a crucial role in Risk measurement and since the precision of risk measures depends on the precision of the return distribution, truly estimation of return distribution has attracted a huge attention. Although using STOCHASTIC VOLATILITY MODELs with parametric assumptions for estimation and illustration of the volatilities has been common in research, these assumptions usually result in careless estimations. So in the following research a semiparametric approach has been used for estimation of the volatility by using a normal mixture DIRICHLET PROCESS. In this paper the distribution of the logarithm of the squared returns of banking index of Tehran Stock Exchange has been estimated by using mixtures of normal family and employing an MCMC ALGORITHM. Finally, the results has been compared to the Basic STOCHASTIC VOLATILITY MODEL. The results show that when the return distribution is skewed, estimates of volatility using the model can differ dramatically from those using a Normal return distribution. Furthermore, when return distribution is similar to a normal distribution, the results of this model are similar to the results of the parametric model.

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APA: Copy

SAJJAD, RASOUL, & ABTAHI, ZAHRA. (2017). RISK EVALUATION OF BANKING INDEX WITH VOLATILITY ESTIMATION THROUGH STOCHASTIC VOLATILITY MODEL: A SEMIPARAMETRIC BAYESIAN APPROACH. FINANCIAL RESEARCH, 19(1 ), 81-96. SID. https://sid.ir/paper/91245/en

Vancouver: Copy

SAJJAD RASOUL, ABTAHI ZAHRA. RISK EVALUATION OF BANKING INDEX WITH VOLATILITY ESTIMATION THROUGH STOCHASTIC VOLATILITY MODEL: A SEMIPARAMETRIC BAYESIAN APPROACH. FINANCIAL RESEARCH[Internet]. 2017;19(1 ):81-96. Available from: https://sid.ir/paper/91245/en

IEEE: Copy

RASOUL SAJJAD, and ZAHRA ABTAHI, “RISK EVALUATION OF BANKING INDEX WITH VOLATILITY ESTIMATION THROUGH STOCHASTIC VOLATILITY MODEL: A SEMIPARAMETRIC BAYESIAN APPROACH,” FINANCIAL RESEARCH, vol. 19, no. 1 , pp. 81–96, 2017, [Online]. Available: https://sid.ir/paper/91245/en

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