It is widely accepted that equity return volatility increases more following negative shocks rather than positive shocks. However, much of value‐at‐risk (VaR) analysis relies on the assumption that returns are normally distributed (a symmetric distribution). This article considers the effect...

This article investigates the effect of modeling extreme events on the calculation of minimum capital risk requirements for three LIFFE futures contracts. The use of internal models will be permitted under the European Community Capital Adequacy Directive II and will be widely adopted in the...

Many popular techniques for determining a securities firm’s value at risk are based upon the calculation of the historical volatility of returns to the assets that comprise the portfolio, and of the correlations between them. One such approach is the J.P. Morgan RiskMetrics methodology using...

This paper proposes a new model for autoregressive conditional heteroscedasticity and kurtosis. Via a time-varying degrees of freedom parameter, the conditional variance and conditional kurtosis are permitted to evolve separately. The model uses only the standard Student’s t density and...

A large number of important practical tasks can be accomplished using a multivariate GARCH model. This paper examines the relatively small number of software packages that are currently available for estimating such models, in spite of their widespread use. The review focuses upon estimation...

This paper investigates the frequency of extreme events for three LIFFE futures contracts for the calculation of minimum capital risk requirements (MCRRs). We propose a semi-parametric approach where the tails are modelled by the Generalised Pareto Distribution and smaller risks are captured by...