Comparing the Frechet Distribution and the Generalized Pareto Distribution in Estimating Value at Risk and Conditional Value at Risk in Tehran Stock Exchange

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Meharani Azadeh; NAJAFI MOGHADAM ALI; BAGHANI ALI

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Paper Information

Journal: FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES) Year:2021 | Volume:14 | Issue:50 Page(s): 109-134

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Information Journal Paper

Title

Comparing the Frechet Distribution and the Generalized Pareto Distribution in Estimating Value at Risk and Conditional Value at Risk in Tehran Stock Exchange

Author(s)

Meharani Azadeh | NAJAFI MOGHADAM ALI | BAGHANI ALI | Issue Writer Certificate

Keywords

Variation at risk

Conditional Value at Risk

generalized extreme value distribution

Frechet distribution

Generalized Pareto Distribution

Abstract

Selecting the most accurate method of risk measurement is the main challenge in risk estimation. This study aims to measure value at risk (VaR) and Conditional Value at Risk (CoVar) in Tehran Stock Exchange (TSE) using the Frechet distribution (FD) and the Generalized Pareto Distribution (GPD). It used the data from 21 and 63-day time series of TEPIX, free-float, and the indices of the top 50 TSE companies between 2012-3-20 and 2020-3-19. It used COPIC post-test and Christoffersen’ s conditional coverage test for models statistical confirmation. It applied Lopez and Blanco-Ihle’ s second loss functions for model comparison. The CoVaR models were ranked by two loss functions, including Mean Absolute Error (MAE) and Root Mean Square Error (RMSE). Results indicated according to the statistics measured in Lopez’ s second loss function, GPD performed better than FD in measuring VaR of TEPIX and the return index of the selected 50 companies, however, FD performed better for the free-float index. Blanco-Ihle’ s loss function results contradicted the ones derived from Lopez’ s second loss function. MAE and RMSE results indicated FD is better in estimating CoVaR.

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APA: Copy

Meharani, Azadeh, NAJAFI MOGHADAM, ALI, & BAGHANI, ALI. (2021). Comparing the Frechet Distribution and the Generalized Pareto Distribution in Estimating Value at Risk and Conditional Value at Risk in Tehran Stock Exchange. FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES), 14(50 ), 109-134. SID. https://sid.ir/paper/951416/en

Vancouver: Copy

Meharani Azadeh, NAJAFI MOGHADAM ALI, BAGHANI ALI. Comparing the Frechet Distribution and the Generalized Pareto Distribution in Estimating Value at Risk and Conditional Value at Risk in Tehran Stock Exchange. FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES)[Internet]. 2021;14(50 ):109-134. Available from: https://sid.ir/paper/951416/en

IEEE: Copy

Azadeh Meharani, ALI NAJAFI MOGHADAM, and ALI BAGHANI, “Comparing the Frechet Distribution and the Generalized Pareto Distribution in Estimating Value at Risk and Conditional Value at Risk in Tehran Stock Exchange,” FINANCIAL KNOWLEDGE OF SECURITY ANALYSIS (FINANCIAL STUDIES), vol. 14, no. 50 , pp. 109–134, 2021, [Online]. Available: https://sid.ir/paper/951416/en

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