Estimation Value at Risk using by combining approach Exteme Value Theory and CIPRA at Tehran stock Exchange

Subject Areas : Financial engineering

Ehsan Atefi ¹ , Meysam Rashidi Ranjbar ²

1 - Department of industrial, Khaje Nasirodin Toosi university, Tehran, Iran
2 - Department of management and economic, Semnan university, Semnan, Iran

Received: 2018-05-07 Accepted : 2018-07-23 Published : 2019-03-21

Keywords: Value at Risk, Extreme Value, peak over threshold, backtesting, Cipra,

Abstract :

The expansion of the capital market and the reduction of interest rates on commercial banks has made that investing in dominate shares as one of the most important opportunities for obtain gain on investment, which requires risk acceptance. In this paper, the goal is to extract the residual values of the logarithmic return of the Tehran stock exchange index using the CIPRA model. Then, using the extreme value theory, the extreme value model was obtained for these residual. Extreme value theory is a good approach to the estimation of high and low tails and measure such as Value Risk (VaR). In order to determine the performance of this method, another model was compared with this model using the two indexes include Tehran Stock Exchange and the Top 50 Industry Index at 99 and 99.5% for the estimated value of risk. The results of the backtesting show that the EVT-CIPRA approach works better.