Template-type: ReDIF-Paper 1.0
Author-Name: Michael McAleer
Author-Person: pmc90 
Author-Workplace-Name: Econometrisch Instituut (Econometric Institute), Faculteit der Economische Wetenschappen (Erasmus School of Economics)
	Erasmus Universiteit, Tinbergen Instituut (Tinbergen Institute).
Author-Name: Juan-Ángel Jiménez-Martín
Author-Email: juanangel@ccee.ucm.es
Author-Homepage: https://www.ucm.es/fundamentos-analisis-economico2/jajm
Author-Person: pji27 
Author-Workplace-Name: Departamento de Economía Cuantitativa (Department of Quantitative Economics), Facultad de Ciencias Económicas y Empresariales 
	(Faculty of Economics and Business), Universidad Complutense de Madrid
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2
Author-Workplace-Homepage: https://www.ucm.es/icae
Author-Name: Teodosio Pérez-Amaral
Author-Email: teodosio@ccee.ucm.es
Author-Homepage: https://www.ucm.es/fundamentos-analisis-economico2/perez-amaral,-teodosio
Author-Workplace-Name: Departamento de Economía Cuantitativa (Department of Quantitative Economics), Facultad de Ciencias Económicas y Empresariales 
	(Faculty of Economics and Business), Universidad Complutense de Madrid
Author-Workplace-Homepage: https://www.ucm.es/fundamentos-analisis-economico2
Author-Workplace-Homepage: https://www.ucm.es/icae
Title: International Evidence on GFC-robust Forecasts for Risk Management under the Basel Accord
Abstract: A risk management strategy that is designed to be robust to the Global Financial Crisis
	(GFC), in the sense of selecting a Value-at-Risk (VaR) forecast that combines the
	forecasts of different VaR models, was proposed in McAleer et al. (2010c). The robust
	forecast is based on the median of the point VaR forecasts of a set of conditional
	volatility models. Such a risk management strategy is robust to the GFC in the sense
	that, while maintaining the same risk management strategy before, during and after a
	financial crisis, it will lead to comparatively low daily capital charges and violation
	penalties for the entire period. This paper presents evidence to support the claim that the
	median point forecast of VaR is generally GFC-robust. We investigate the performance
	of a variety of single and combined VaR forecasts in terms of daily capital requirements
	and violation penalties under the Basel II Accord, as well as other criteria. In the
	empirical analysis, we choose several major indexes, namely French CAC, German
	DAX, US Dow Jones, UK FTSE100, Hong Kong Hang Seng, Spanish Ibex35, Japanese
	Nikkei, Swiss SMI and US S&P500. The GARCH, EGARCH, GJR and Riskmetrics
	models, as well as several other strategies, are used in the comparison. Backtesting is
	performed on each of these indexes using the Basel II Accord regulations for 2008-10 to
	examine the performance of the Median strategy in terms of the number of violations
	and daily capital charges, among other criteria. The Median is shown to be a profitable
	and safe strategy for risk management, both in calm and turbulent periods, as it provides
	a reasonable number of violations and daily capital charges. The Median also performs
	well when both total losses and the asymmetric linear tick loss function are considered
Classification-JEL: G32, G11, G17, C53, C22.
Keywords: Median strategy, Value-at-Risk (VaR), daily capital charges,
	robust forecasts, violation penalties, optimizing strategy, aggressive risk management,
	conservative risk management, Basel II Accord, global financial crisis (GFC).
Length: 39 pages 
Creation-Date: 2011 
Number: 2011-01
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1101.txt
File-URL: https://eprints.ucm.es/id/eprint/12020/1/1101.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1101