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FOREX Risk: Measurement and Evaluation Using Value‐at‐Risk
Author(s) -
Bredin Don,
Hyde Stuart
Publication year - 2004
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.0306-686x.2004.00578.x
Subject(s) - value at risk , ewma chart , portfolio , econometrics , foreign exchange market , risk measure , value (mathematics) , sample (material) , autoregressive conditional heteroskedasticity , economics , financial economics , foreign exchange , measure (data warehouse) , actuarial science , computer science , monetary economics , statistics , risk management , finance , mathematics , data mining , volatility (finance) , chemistry , process (computing) , control chart , chromatography , operating system
We measure and evaluate the performance of a number of Value‐at‐Risk (VaR) methods using a portfolio based on the foreign exchange exposure of a small open economy (Ireland) among its trading partners. The sample period highlights the changing nature of Ireland’s exposure to risk over the past decade in the run‐up to EMU. Our results offer an indication of the level of accuracy of the various approaches and discuss the issues of models ensuring statistical accuracy or more conservative leanings. Our findings suggest that the Orthogonal GARCH model is the most accurate methodology while the EWMA specification is the more conservative approach.