
doi: 10.2139/ssrn.2808163
We construct “Hybrid Value at Risk” (HYVAR) that is an arbitrary mixture of Historical VAR and Monte Carlo VAR. The procedure is capable of retaining both the correlation matrix of the original time series and also jumps/‘fat tails’. For this reason HYVAR provides more realistic scenarios, and as many as desired. The main idea is to use a “mixing angle” to mix HVAR with Monte Carlo HVAR.
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