The assessment of extreme value theory and Copula - Garch models in prediction of value at risk and the expected short fall in portfolio Investment Company in Tehran stock exchange.

Subject Areas : Financial engineering

ali alizadeh ¹ , Mirfeiz Fallah ²

1 - Department of Financial Management, Science and research branch, Islamic Azad University, Tehran, iran
2 - Department of Financial Management, central Tehran Branch, Islamic Azad University. Tehran, Iran and member of Modern Financial Risk Research Group

Received: 2019-11-20 Accepted : 2019-12-17 Published : 2021-03-21

Keywords: "Value at Risk", "Copula", " ARIMA-GARCH", "Generalized Extreme Value Theory", "Backtesting",

Abstract :

The present study has endeavored to represent a more precise model to calculate the risk of banks in this study by ARIMA-GARCH-COPULA Model has been introduced.In obtaining the iid distributions and variance estimation the mean model and conditional variance have been determined and estimated simultaneously.In so doing, the ARIMA methodology has been employed to model the average return on assets of the study, and for modeling the research conditional variance of GARCH have been applied. Also mean error criterion has been used to compare the different models of VAR estimation, and for the purpose of testing statistical results backtesting methods have been employed. Based on mean error criterion, the proposed model of the study at hand has demonstrated the most accuracy The GEV model derived from the EVT has been ranked second The output of the Dow ranking method, however, has been very similar to one another According to Dow ranking method, the GEV model has had the lowest loss function at 5% level of significance, and at 1% level of significance, the HS model has demonstrated the least loss function. ES calculations have also been carried out for the four models with ARIMA-GARCH-COPULA model showing the least loss.