Template-type: ReDIF-Paper 1.0
Author-Name: Paulo Araújo Santos
Author-Workplace-Name: Escola Superior de Gestão e Tecnologia de Santarém and Center of Statistics and Applications,
	University of Lisbon
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-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-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
Title: GFC-Robust Risk Management Under the Basel Accord Using Extreme Value Methodologies
Abstract: In McAleer et al. (2010b), a robust risk management strategy to the Global Financial
	Crisis (GFC) was proposed under the Basel II Accord by selecting a Value-at-Risk
	(VaR) forecast that combines the forecasts of different VaR models. The robust forecast
	was based on the median of the point VaR forecasts of a set of conditional volatility
	models. In this paper we provide further evidence on the suitability of the median as a
	GFC-robust strategy by using an additional set of new extreme value forecasting models
	and by extending the sample period for comparison. These extreme value models
	include DPOT and Conditional EVT. Such models might be expected to be useful in
	explaining financial data, especially in the presence of extreme shocks that arise during
	a GFC. Our empirical results confirm that the median remains GFC-robust even in the
	presence of these new extreme value models. This is illustrated by using the S&P500
	index before, during and after the 2008-09 GFC. 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, including several
	tests for independence of the violations. The strategy based on the median, or more
	generally, on combined forecasts of single models, is straightforward to incorporate into
	existing computer software packages that are used by banks and other financial
	institutions.
Classification-JEL: G32, G11, G17, C53, C22.
Keywords: Value-at-Risk (VaR), DPOT, daily capital charges, robust forecasts,
	violation penalties, optimizing strategy, aggressive risk management, conservative risk
	management, Basel, global financial crisis.
Note: The authors are most grateful for the helpful comments and suggestions of
	participants at the International Conference on Risk Modelling and Management,
	Madrid, Spain, June 2011. For financial support, the third author wishes to thank the
	Australian Research Council, National Science Council, Taiwan, and the Japan Society
	for the Promotion of Science. The second and fourth authors acknowledge the financial
	support of the Ministerio de Ciencia y Tecnología and Comunidad de Madrid, Spain.
Length: 33 pages 
Creation-Date: 2011 
Number: 2011-27
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1127.txt
File-URL: https://eprints.ucm.es/id/eprint/12968/1/1127.pdf
File-Format: Application/pdf
File-Function: july 2011
Handle: RePEc:ucm:doicae:1127