Template-type: ReDIF-Paper 1.0
Author-Name: Chia-Lin Chang
Author-Person: pch286 
Author-Email: changchialin@nchu.edu.tw
Author-Workplace-Name: NCHU Department of Applied Economics (Taiwan)
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: 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: Teodosio Pérez-Amaral
Author-Email: teodosio@ccee.ucm.es
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: Risk Management of Risk under the Basel Accord: Forecasting Value-at-Risk of VIX Futures
Abstract: The Basel II Accord requires that banks and other Authorized Deposit-taking Institutions
	(ADIs) communicate their daily risk forecasts to the appropriate monetary authorities at the
	beginning of each trading day, using one or more risk models to measure Value-at-Risk
	(VaR). The risk estimates of these models are used to determine capital requirements and
	associated capital costs of ADIs, depending in part on the number of previous violations,
	whereby realised losses exceed the estimated VaR. McAleer, Jimenez-Martin and Perez-
	Amaral (2009) proposed a new approach to model selection for predicting VaR, consisting of
	combining alternative risk models, and comparing conservative and aggressive strategies for
	choosing between VaR models. This paper addresses the question of risk management of risk,
	namely VaR of VIX futures prices. We examine how different risk management strategies
	performed during the 2008-09 global financial crisis (GFC). We find that an aggressive
	strategy of choosing the Supremum of the single model forecasts is preferred to the other
	alternatives, and is robust during the GFC. However, this strategy implies relatively high
	numbers of violations and accumulated losses, though these are admissible under the Basel II
	Accord.
Classification-JEL: G32, G11, G17, C53, C22.
Keywords: Median strategy, Value-at-Risk (VaR), daily capital charges,
	violation penalties, optimizing strategy, aggressive risk management, conservative risk
	management, Basel II Accord, VIX futures, global financial crisis (GFC).
Length: 31 pages 
Creation-Date: 2011 
Number: 2011-02
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1102.txt
File-URL: https://eprints.ucm.es/id/eprint/12285/1/1102.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1102