Value-at-Risk with Application of DCC-GARCH Model
Value-at-Risk with Application of DCC-GARCH Model
The article concentrates on modelling of volatility of capital markets and estimation of Value-at-Risk. The aim of the article is the description of volatility and interdependencies among three indices: WIG (Poland), DAX (Germany) and DJIA (United States). In order to measure the volatility and strength of interdependencies DCC-GARCH-In model was used, where an impact of the volatility of other markets is additionally taken into consideration during construction of the model. The conducted research for the years 2000-2012 confirmed the presence of interactions among selected capital markets. Next, the model DCC-GARCH-In was applied for evaluation of Value-at-Risk and the obtained measure was assessed with application of backtesting procedure. The results confirm that including volatility in the variance in DCC-GARCH-In model enables better assessment of VaR measure.
backtesting, DCC-GARCH model, ddc:330, G15, value-at-risk, capital market, C58, conditional variance
backtesting, DCC-GARCH model, ddc:330, G15, value-at-risk, capital market, C58, conditional variance
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